141 P.2d 346 | Mont. | 1943
Lead Opinion
This is one of four separate actions commenced by the two taxpaying plaintiffs to recover approximately $10,000 in the aggregate paid by the city of Livingston to the corporate defendants. The plaintiffs are the same in each of the four cases but a single corporate defendant is named in each action. The four cases were briefed and argued together. The money sought to be recovered was allowed and paid on bills against the city presented in the usual form, approved and warrants issued therefor, and was for goods, wares and merchandise sold and delivered to the city by the defendant corporations, and used for municipal purposes. The city of Livingston was made a defendant when, upon demand, the city council failed and refused to commence the proceedings demanded.
The right to recover the money is predicated upon the fact that certain members of the city council and other city officials, at the times the things bought by the city were contracted and paid for, were connected with as employees or officials of the defendant corporations, and that by reason of the relations existing between such city officials and employees and the corporate defendants, *51 the contracts between the city and the defendants were alleged to be void; that the contracts being void the defendants still retain title to the goods sold the city and the city never parted with title to the money paid for the goods. No offer is made to return the goods, which the city received and used under the alleged void contracts, and it clearly appears that any return of such goods would be impossible by reason of their having been consumed or used.
The trial court made extended findings of fact. We give the substance of such as tend to emphasize the more important issues. The issues in the four cases were the same, and the Continental Oil Company case was tried as typical of the four. So far as the record shows all of the merchandise and supplies purchased from the defendant Continental Oil Company consisted of gasoline.
In Finding No. 9 the court mentions the fact that the city bought the supplies from the Continental Oil Company and the same was consumed by the city for municipal purposes in the operation and maintenance of its water works system, its street department and for other purposes, and further finds that "the said city has not offered to return, and has not returned, any thereof, but has used and consumed the same, and that it is now and was at the time of the commencement of this action, and has been at all times since the receipt of the same by the said city, impossible for it to return the same to said defendant; that said gasoline and petroleum products sold and delivered to the said city, as alleged in each of the causes of action in the complaint contained, were at the respective times of the sale thereof, and payment therefor, of the reasonable value of the prices and amounts which said city paid for the same as hereinabove set forth, and that all of the said gasoline and petroleum products sold by defendant to the city as aforesaid, were sold at the reasonable price therefor."
In Finding No. 10 the court finds that out of the money the defendant received from the city for gasoline sold to it five cents per gallon was paid by the defendant to the state of Montana as *52 and for the five cent tax on all gasoline sold by vendors of such products, and that pursuant to the provisions of section 2396.4, Revised Codes, the city had received back from the state such five cents per gallon as a rebate allowed on all purchases of gasoline made by the city, such rebate amounting to the sum of $351.95 and the plaintiffs in this action make no allowance for that amount. It is not to be understood that failure of plaintiffs to take this tax refund made to the city into account has any particular bearing on the merits of the actions, but certainly in an equitable action reduction of the amount demanded to the extent of such refund should have been made.
The court's Finding No. 11 is as follows:
"That all of the sales of gasoline and petroleum products made by defendant Continental Oil Co. to the said city of Livingston set forth in the complaint * * * were made * * * during the period from May 1st, 1937, to April 3d 1939, and * * * were received and consumed * * * prior to April 3d 1939, in the various municipal activities and business of said city, and it is, and at all times since the receipt and use thereof by said city has been, impossible for the city to return the same or any thereof * * * and idle, useless and unavailing for defendant Continental Oil Co. to demand the return thereof.
"That notwithstanding the facts and premises the plaintiffs and said city of Livingston have at all times aforesaid, and until March 29, 1940, the date of the commencement of this action, stood by, waited and forbore bringing any action or suit to enjoin the execution of any of the sales mentioned in the complaint herein, and forbore bringing any action or proceeding to set aside the same, and that none of said sales have been rescinded, and by the use and consumption of said gasoline and petroleum products said city has put it out of its power to restore same, or any thereof, to said defendant."
In other findings of the court it is set forth that the city records on two occasions were examined by the state examiner's office, approximately a year intervening between the two examinations, and following each examination written advice was sent by the *53 state examiner to the city officials with directions that such advice by the state examiner be read at a regular meeting of the council. The attention of the council and mayor was called to the fact that various city officials had been guilty of violating numerous statutes, particularly section 445 of the Revised Codes, but that such officials continued to authorize purchases by the city from the corporate defendants in which the various members of the council and the mayor were interested. Following the receipt of one such advice from the state examiner, the court by Finding No. 20, sets forth: "That thereafter, on December 5th, 1938, at a meeting of the city council of the defendant city, at which the defendant M.K. Musser (9) the Mayor of the said city, presided and was present, the report aforesaid of the State Examiner was read, accepted, and placed on file by the said city council; and that then and there and thereby the said defendant, M.K. Musser, learned of its contents."
In Finding No. 21 the specific statutes that were called to the attention of the mayor and city council by the state examiner are mentioned. In another finding the court sets forth that on January 4, 1940, the plaintiffs demanded of the defendant Continental Oil Company the repayment to the city of the several sums of money received by it alleged to be in violation of law. The court's conclusions of law were as follows:
"1. That the plaintiffs are not entitled, in law or in equity, to recover in this action.
"2. That the defendant, Continental Oil Co., is entitled to a dismissal of this action with its costs herein incurred.
"3. That the remaining defendants herein named are entitled to a dismissal of this action with their costs herein incurred."
Judgment in accordance with such findings of fact and conclusions of law was made and entered. The appeals are from the judgments.
The actions are in equity.
Thirty-two specifications of error are assigned, which, for the purposes of argument, are grouped by counsel for plaintiffs under three "points of law" as follows: *54
"1. The sales described in the complaint are wholly void because of the interest therein of the mayor and members of the city council.
"2. Where the contracts or sales involved are made contrary to the express prohibition of statute all sums paid by the municipality may be recovered with interest and without restitution made or offered for the services, goods, or other property received.
"3. The interest which invalidates is that of an employee, or of an officer or stockholder in a contracting corporation."
We think the merits of these actions can be arrived at more directly by their consideration under the following headings which will bring before us all the essentials:
1. Are contracts made in violation of sections 444 and 445, Revised Codes, void or only voidable under section 446?
2. Do plaintiffs' bills state a cause of action?
3. Granting that the transactions between the municipality and the corporations violated the statutes, is the remedy by actions in equity or by prosecutions under the criminal law?
4. The contracts being illegal, was the city under any obligation to return the merchandise or account for its value?
5. Good faith.
We will take these questions up in the order mentioned.
No. 1. Section 445, Revised Codes, enumerates the public officials who shall not be personally interested in purchases or sales made by them in their official capacity. The individual defendants are among those enumerated. Section 446 provides: "Every contract made in violation of any of the provisions of the two preceding sections may be avoided at the instance of any party except the officer interested therein."
We will say in passing that the trial court having found that the merchandise sold by the defendant corporations to the city had been consumed and could not be returned, we are inclined to think that the plaintiffs' right to recover is barred by sections 12 and 27 of Article III of the Constitution of Montana, relating to Due Process. (See secs. 651 and 657, 12 Am. Jur.) We deem *55 it unnecessary however to determine that question in these actions.
Taking up the construction of section 446, Revised Codes,[1] statutes must be construed by giving to the words employed "the approved usage of the language." (Sec. 15, Rev. Codes.) That being the statutory rule, section 446 "does not require construction, but it construes itself." (Cruse v. Fischl,
The fact that section 446 provides that contracts made in[2] violation thereof may be avoided by certain parties but not by others means that as against the latter such contracts are binding *56
and effective; if such contracts were absolutely void they could have no such effect. (See Stevens v. Woodmen of the World,
American Jurisprudence as cited says: "Where a statute which prohibits an agreement at the same time also limits its effect or declares the consequences which shall attach to the making thereof, the rule that an agreement prohibited by statute is void does not apply and the effect of such an agreement is governed by the statute." Section 445, Revised Codes, prohibits such contracts as those involved here, and section 10827, Revised Codes, declares the consequences that shall attach to the making of such contracts by the defendant officials.
Voidable contracts are not legally void and cannot be set[3] aside or disregarded until they are decreed to be void by a court having jurisdiction. A contract may be obviously void, but if the parties thereto elect to proceed thereunder they may do so if no other parties are injured. If the city of Livingston chose to accept the goods it would be absurd to contend that either the city or any party acting in its behalf could be compelled to bring an action to have the contracts declared void.
In Stevens v. Woodmen of the World, supra, this court said: "When we say that a contract is void as a result of fraud * * * all that is meant by such term, * * * is that a court of law will not lend its aid to enforce the performance of a contract. In the case of Ewell v. Daggs,
It is true that we adopted our sections 444, 445, and 446 from[5] California's Political Code, and that the supreme court of that state in Berka v. Woodward,
No. 2. Do the complaints or bills state a cause of action? The[6] contracts being not void but voidable they cannot be avoided without restoring the consideration or otherwise doing equity. Since the complaints show affirmatively that restoration cannot be made no cause of action is stated. Plaintiffs' pleadings utterly fail to show any financial injury to anyone, but rather the violation of a criminal statute, not by the defendants from whom the plaintiffs seek redress but by the individual defendants named in the bills but from whom no recovery is sought.
No. 3. We think the plaintiffs have mistaken their remedy.[7] Sections 444 and 445 apply only to public officials, not to sellers of goods. Section 446 applies only to contracts in which the public officials mentioned in the two prior sections might be interested. Other sellers are not enjoined to observe any of the *59 provisions of sections 444 and 445 and could not, except as possible accomplices, violate any of those laws as such laws apply to public officials only. We do not think there is any rule of equity that empowers any court to penalize a corporation on the ground that one of its agents, while serving a municipality, violated his trust as an officer of the municipality. The respective obligations of the official to his employer on the one hand and to the municipality on the other are separate and distinct. There is no relation whatever between the two. The employer is no more blamable for the action of the employee public official than the city. The remedy for violation of either does not depend in the slightest degree upon the other. The code sections mentioned and section 10827 were obviously intended to punish and to purge the public service of persons who betray the public trust reposed in them, not to confiscate the property of business concerns whose employees they happen to be. There is another, and a distinct remedy for the latter.
Counsel for plaintiffs, under the heading "Conclusion" at the close of his brief, confirms our view that the plaintiffs' remedy does not lie in equity, but in criminal actions. In plaintiffs' "Conclusion" it is said,
"What has been written on both sides of the controversy at bar must not serve, we note again, to obscure the fundamental issue before this Court. The respondents have repeatedly broken the criminal statutes of this state. * * *
"Are these respondents then entitled to any rights in equity to protect them in their possession of what amounts to the fruits of crime? The decided cases in point abundantly answer this query in the negative.
"Counsel on the other side have not argued this question at all as we read their brief. Nor as we understand the views of the trial court was this question decided below.
"Rather the rights of the parties were adjudged as though there were no violation involved of a penal statute, no crime committed and unblushingly admitted. * * *
"If they cannot find their property, the rights of the municipality *60 are not in any degree lessened. It in its turn is entitled to its own, viz: its moneys unlawfully and illegally paid over to criminals, and by them had in hand as the profits of their crime. These profits they must disgorge."
In passing it is noteworthy that what plaintiffs seek to make the defendants "disgorge" is not merely the profits of the transactions but the entire amount the city paid for the goods it has consumed.
It must also be kept in mind that the actions before us are in[8] equity, not criminal prosecutions. In 10 R.C.L., page 341, section 91, we read: "Barring these possible exceptions, therefore it is a universally acknowledged principle that a court of equity has no jurisdiction in matters merely criminal or immoral. It leaves the correction of these matters to the criminal courts. The remedy at law by indictment and prosecution is presumed to be adequate, but if it is not so, the relief must come from the lawmaking power, and not from the courts."
This court said in State ex rel. Stewart v. DistrictCourt,
In Huntington v. Attrill,
"The test whether a law is penal, in the strict and primary sense, is whether the wrong sought to be redressed is a wrong to the public or a wrong to the individual. * * *
"Crimes and offenses against the laws of any state can only be *61 defined, prosecuted, and pardoned by the sovereign authority of that state; * * *."
It should be further remembered that under our laws no person[9] may be branded as a criminal unless and until he be proceeded against by indictment or information in a proceeding that measures up to the constitutional requirements of due process of law. Section 10827, Revised Codes, provides severe punishment for the violation of section 445, and the guilt of the individual defendants in these actions may not be presumed in advance of a fair trial. "No person can be punished for a public offense, except upon a legal conviction in a court having jurisdiction thereof." (Sec. 11606, Rev. Codes.) And, "a defendant in a criminal action is presumed to be innocent until the contrary is proved." (Sec. 11971, Rev. Codes.)
No. 4. Should plaintiffs be decreed the right to recover the[10] moneys paid to the corporations without restoring the goods? Or, in other words, may the city in these equitable actions, avoid fully performed contracts, even where made in violation of a specific statute, and recover the money paid for the merchandise received under the contract, where, as here, it is admitted that the merchandise has been used and cannot be restored? Not without abrogating the established rule in this jurisdiction.
In Morse v. Granite County, supra, this court permitted a[11] recovery against the county because it had obligated itself, not by the voidable contract, but by keeping and using the property in spite of the fact that the contract was voidable. So here, having kept and consumed the goods in face of the fact that they were purchased under a voidable contract, the city is obligated to return the merchandise or pay the reasonable value thereof, and it therefore follows that the city cannot, after consuming the goods, and being unable to restore them, sue and recover the money paid for the goods. Obviously plaintiffs assume that because the vendee in the contracts is a municipality, a public body, a creature of the state, it is not amenable to the same rules of equity that maintain where the parties to such actions are *62
private persons. The assumption ignores that profound obligation that rests upon the state, as the exemplar of law and justice, to observe with the strictest nicety all its contractual obligations irrespective of the perfidy or criminal liability of the other contracting party. Even if the state deal with a criminal behind the bars of prison, it would be contemptible for the state to fail to do equity. There is imposed upon the subdivision of the state and the municipalities created by state authority, a like obligation. Equity makes no distinction between public bodies and private persons as to obligations arising out of contract. (State ex rel. N.W. Bank v. Dickerman, supra; Morse v.Granite County, supra; First Nat. Bank v. Valley County,
The correct rule in our opinion appears in an early California case, the pertinent part of which is quoted by this court inState ex rel. N.W. Bank v. Dickerman, supra [
The rule on restoration applied in the Dickerman case was followed in Morse v. Granite County, supra, and Hicks v.Stillwater County,
Since the contracts by which the city obtained the goods were[12] voidable, it could sue to recover the excess of the contract price over the real value, if any; which means again that it cannot equitably keep the goods and their value too. In other words, the statute not being penal, punitive nor one of forfeiture, the city cannot avoid the contract and recover the consideration paid, where it has consumed the goods, and has paid no more than their value. In equity, "the city is not exempted from the common obligation to do justice, which binds individuals." (State v. Dickerman, supra.) This court said, in First Nat. Bank v. Valley County,
No. 5. The question of good faith is not an issue in these[13] actions. It would be a vital issue in fixing the penalty to be imposed under section 10827, Revised Codes, if conviction were had in a criminal action, but not in an equity action. The fact that the interested city officials persisted in their illegal practices after being warned by the state examiner that their acts constituted a violation of the statute, would preclude the officials from any plea of good faith as a defense in a criminal action.
The lower court must be affirmed. First, because the actions do not state a cause of action in equity, no pecuniary injury being shown. Second, the record strongly tends to show the defendants have committed a criminal, but not a civil offense, and the offense is against the state, not the plaintiffs, and any recovery of a pecuniary nature would be payable to the state, not to the city of Livingston. Third, we decline by our judgment to commit the *64 state to a violation of a fundamental maxim of equity in order that delinquent city officials or their employers may be punished indirectly, by way of forfeiture, for violations of a criminal statute, particularly where, as here, there is a full and complete remedy at law provided by section 10827, Revised Codes.
The judgments are affirmed.
MR. CHIEF JUSTICE JOHNSON concurs.
Concurrence Opinion
By section 444, Revised Codes, public officers, including city officers, are prohibited from being interested in any contract made by them in their official capacity. By section 445, they are prohibited from being purchasers at any sale or vendors at any purchase made by them in their official capacity. By section 5069, Revised Codes, all city officers are prohibited from being interested in the profits of any contract made by the city council while they are or were in office.
By section 10827, Revised Codes, the violation by a public officer of any of the prohibitions declared in the above mentioned sections is made a public offense for which he may be punished by fine or imprisonment, coupled with disqualification from holding public office.
The law in these four sections is a prohibition directed against the officers personally. As to the transactions and the property rights resulting, the only statutory provision declaring the effect thereon of the law violation is in section 446, Revised Codes, which says that contracts made in violation of any of the provisions of sections 444 and 445 may be avoided at the instance of any party except the officers interested therein. So far as we have statutory law, the question before us then narrows down to the meaning of the provision for avoiding the contracts. The provision is that the contracts "may be avoided."
Whatever might have been done to avoid any contracts made in the transactions under consideration — that, it seems, would necessarily have to be done in each instance before the transaction was *65 in every way completed, or at least while the parties could still be put in statu quo ante.
Here, all of these transactions were fully completed. The goods were bought and delivered; paid for and used. There was no more any contract. The contract was done. There could be no refusal to perform nor any injunction against performance. The relation between the parties had gone beyond the point where there was any contract to avoid.
With no provision as to the contract rights resulting other than that in section 446, there is no statutory authority for recovery in these suits; nor do we find any decisions of our own court declaring a policy which entitles plaintiffs to recover. On the contrary, the decisions, wherein the principle here involved has been dealt with, all point to a policy opposed to the right of recovery under the facts and circumstances here relied on. (Morse v. Granite County,
The rule adopted and adhered to in these decisions is that the unlawful personal interest of an officer of a municipal corporation in the subject matter of a transaction which he handles in his official capacity does not of itself relieve the municipality from its obligations under the circumstances arising. The municipality may refuse to be bound by the transaction and may avoid the contract entered into. But if it accepts and retains the fruits of the transaction, it must pay the value thereof. It cannot relieve itself of the obligation alone because of the unlawful personal interest of its officer.
Applying that rule to the cases before us, plaintiffs cannot recover. I fully concur in the opinion of Mr. Justice Morris sustaining the judgments of the lower court.
Dissenting Opinion
I dissent. These cases involve the established public policy of *66
this state as formulated by prohibitions of the legislature and by a long line of well-considered decisions of this court. "The prohibition of the legislature cannot be disregarded by the courts." (McManus v. Fulton,
The majority opinion herein not only declines to follow the salutary rule of the Zottman case, supra, but it repudiates same and, in effect, overturns the doctrine announced by this court in numerous decisions, including Lebcher v.Commissioners of Custer County,
This court declines to permit the plaintiff taxpayers to recover for the use of the city of Livingston the money judgments demanded assigning the quite unusual reasons that: (1) No pecuniary injury to the taxpayers is shown; (2) the forbidden *67 acts are crimes against the state and not against the taxpayers; (3) any money recovered by the taxpayers would be payable to the state and not to the city of Livingston; (4) a complete remedy at law is supplied by section 10827, Revised Codes, in providing that the offending officials are "punishable by a fine * * * or by imprisonment in the county jail or state prison * * * and * * * forever disqualified from holding any office in this state"; and (5) judgment against the vendor corporations for the respective amounts had and received by them would violate a fundamental maxim of equity and would inflict upon them punishment, indirectly, for violations of criminal statutes by the delinquent city officials as their employees. Additionally, the specially concurring opinion holds that the taxpayers are too late with their complaints; that they should have been quicker on the trigger in order to catch up with the culprits "in each instance before the transaction was in every way completed, or at least while the parties could still be put in statu quo ante."
These transactions, all forbidden by express statutes, are wholly illegal and void from beginning to end. "It is considered that a contract void in its inception is not validated by performance and remains a void contract." (Bechtold v. City ofWauwatosa,
The speed with which the offending city officials allowed and approved the claims of the vendor corporations which they directed and managed and the speed with which the city's money was handed over in payment of these claims has no influence whatever on the right of the taxpayers to maintain these actions for the recovery of the money so illegally expended and to thereby vindicate a public and common right to have the public funds preserved from spoliation by public officials. "The power to successfully maintain such an action has never been limited to cases where the work has not yet been done, and, if it were, there would be few cases where unfaithful public officials and designing contractors could be prevented from despoiling the public treasury. The right does not depend upon the speed withwhich *68 the law is broken." (Cawker v. City of Milwaukee,
The complaints herein clearly set forth all the facts essential to state causes of action in favor of the plaintiff taxpayers. (See Judith Inland Transp. Co. v. Williams,
Because of the questions of public policy involved and because of the far reaching effect of this departure from the doctrine so long followed by this court, I deem it advisable to review both the facts shown by the record herein and the rules of law applicable to those facts.
The Facts: Paul L. Greene, as Mayor, and John Grady, as a taxpayer of the city of Livingston, plaintiffs, brought these four separate lawsuits to recover, on behalf of said city, money claimed to have been illegally taken and expended from the city's treasury and had and received by the four defendant corporations for materials purchased from them by the city council — (a) in violation of section 5070, Revised Codes, and Chapter 18, Session Laws of 1939, requiring competitive bidding on all contracts for materials where the amount involved exceeds $500, and (b) in violation of sections 5069, 444 and 445, Revised Codes, which forbid a public officer from being interested, either directly or indirectly in the contracts made by a governing body of which he is a member.
The defendant M.K. Musser was the mayor and Daniel N. Miles, E.M. Sybert and E.L. Neal were members of the city council of the defendant city of Livingston, Montana, from May 1, 1937, to May 1, 1939.
During this time the defendant mayor, M.K. Musser, was also general agent and manager of the Livingston office and plant of the defendant Continental Oil Company, a corporation; the defendant *69 councilman Daniel N. Miles was also the president, a director and a stockholder of the defendant, the A.W. Miles Company, a corporation, and of the defendant A.W. Miles Lumber Coal Company, a corporation, the defendant councilman E.M. Sybert was also secretary-treasurer and a director and stockholder of the defendant A.W. Miles Lumber Coal Company, and the defendant councilman E.L. Neal was also the president and a director and a stockholder of the defendant Neal-Landes Company, a corporation.
At various times during this period the city, through its council, purchased supplies and materials in varying amounts from the four defendant corporations.
The claims, which the defendant corporations presented to the city for the merchandise so sold and delivered, were passed upon and allowed by the city council on which council sat the respective vendor corporations' managing officers.
In July, 1937, the state examiner examined the books of the city. His written report of July 14, 1937, addressed and delivered to the defendant mayor, M.K. Musser, and to the city council states: "Your attention is directed to Sections 444 and 5069, Revised Codes 1935, relating to officers interested in contracts. The sections should be read at the next regular meeting of the Council and the fact reported to this department." The minutes of the city council for August 4, 1937, recite that a meeting of the council was held on that date with the defendant mayor, M.K. Musser, presiding and all members of the council present, including the three defendant councilmen, viz: Miles, Sybert and Neal, where the examiner's said report was read, accepted and placed on file.
The council, notwithstanding, continued to purchase materials and supplies for the city from the defendant corporations. Some sixteen months later the state examiner again examined the books and affairs of the city, following which he made another written report to said mayor and city council wherein he said: "We noted a great many claims for supplies furnished by city officials. Section 5069, Rev. Codes, 1935, relating to officers interested *70 in contracts, provides that any officer, councilman or any relative or employee thereof, must not be directly or indirectly interested in the profits of any contract entered into by the council, while he is in office or while he was in office. Section 7581 defines sales as a contract. (See Sections 10827, 444, 445, 446, 448 and 449, Rev. Codes 1935.) These sections should be read at the next regular meeting of the Council and the fact reported to this department. Violations of conducting sales under contract to the City in violation of section 5069 are very serious matters."
The state examiner then wrote the city clerk as follows:
"Helena, November 28, 1938. "Mr. Andrew Peterson, Jr. "City Clerk "Livingston, Montana
"Dear Mr. Peterson:
"Under date of November 23rd we forwarded your report of the last examination on the City of Livingston. To the last paragraph of the `Examiner's Notes' contained in the report, will you kindly add the following:
"The sections referred to herein are as follows: Section 5069. `The mayor, or any member of the council, or any city or town officer, or any relative or employee thereof, must not be directly or indirectly interested in the profits of any contract entered into by the council while he is or was in office.'
"Section 10827. `Every officer or person prohibited by the laws of this state from making or being interested in contracts, or from becoming a vendor or purchaser at sales, or from purchasing scrip, or other evidences of indebtedness, who violates any of the provisions of such laws, is punishable by a fine of not more than one thousand dollars, or by imprisonment in the county jail or state prison not more than five years, and is forever disqualified from holding any office in this state.'
"Chapter 52, R.C.M. 1935 — Section 444. `Members of the legislative assembly, state, county, city, town, or township officers, must not be interested in any contract made by them in *71 their official capacity, or by any body or board of which they are members.'
"Section 445. `State, county, town, township, and city officers must not be purchasers at any sale, nor vendors at any purchase made by them, in their official capacity.'
"Section 446. `Every contract made in violation of any of the provisions of the two preceding sections may be avoided at the instance of any party except the officer interested therein.'
"Section 448. `Every officer whose duty it is to audit and allow the accounts of other state, county, city, township, or town officers, must, before allowing such accounts, require each of such officers to make and file with him an affidavit that he has not violated any of the provisions of this chapter.'
"Section 449. `Officers charged with the disbursement of public moneys must not pay any warrant or other evidence of indebtedness against the state, county, city, town, or township, when the same has been purchased, sold, received, or transferred contrary to any of the provisions of this chapter.'
"Will you kindly see the printer and have him publish this report accordingly?
"Yours truly, "S.L. Kleve "Chief Examiner."
The minutes of the city council for December 5, 1938, recite that at a meeting whereat Mayor M.K. Musser presided and councilmen Miles, Sybert and Neal were present, the examiner's above report "was presented to the Council the same having been read in full by each member of the Council was ordered accepted, approved and filed."
The members of the city council, however, continued as theretofore, to purchase merchandise for the city from the defendant corporations.
The merchandise has lost its identity. None remains in specie. All has been consumed.
On January 2, 1940, the plaintiffs demanded of the city that *72 it bring suit to recover the moneys so illegally expended from the city treasury but the city refused so to do.
Plaintiffs also made demand upon the defendant corporations to pay into the city treasury all moneys received by them under such contracts. On the refusal of the defendant corporations to pay, plaintiffs on March 29, 1940, commenced these four separate lawsuits to recover on behalf of the city the respective amounts of money claimed to have been illegally expended from the city's treasury and had and received by the four defendant corporations for materials and supplies so furnished by them under said contracts with said city council.
The complaint in each case sets forth numerous separate causes of action. A money judgment in a definite, ascertained amount, is demanded in each case. An aggregate of $1,641.14 is demanded of the defendant, Continental Oil Company in twenty-five causes of action; $630.92 is demanded of the defendant, the A.W. Miles Company in twenty-five causes of action; $7,348.65 is demanded of the defendant, A.W. Miles Lumber Coal Company in forty causes of action and $335.45 is demanded of the defendant, Neal-Landes Company in nine causes of action.
In their answers the defendant corporations admit practically all of the sales charged and admit that at the time such sales were made four members of the city council were then also managing officers or managing agents of one or more of the vendor corporations.
In the A.W. Miles Lumber Coal Company case, No. 8321, it is charged that, without advertising or calling for bids and with no competitive bidding or letting to the lowest responsible bidder, the defendant corporation sold to the City of Livingston a quantity of merchandise for the price of $1,330.36. The evidence sustains such allegations and shows that on June 7, 1937, the city's warrant No. 2839, in the amount of $1,330.36, payable to the order of the defendant Miles Lumber Coal Company, was issued in payment of the above merchandise and thereafter cashed.
The Law. The legislative authority of the state is vested in *73 the legislature. It has the power to legislate, i.e., to enact laws. (Constitution of Montana, Art. VI, sec. 1.)
Municipal corporations "are creatures of the law, and not of nature. They have not natural rights, but only rights given by the law. Their contracts obtain validity only by force of the law authorizing their making. It follows that, if they make contracts that the law does not empower them to enter into, there is no authority for such contract, — nothing for it to stand upon, — and it falls of its own weight. It is void." (Lebcher v.Commissioners of Custer County,
It is therefore a primary rule that municipal corporations can exercise no powers other than those expressly conferred by the legislative Acts of the state or, necessarily implied to carry out the powers expressly granted by the statutes.
Another fundamental rule is that the delegated powers of all subordinate state agencies, including municipal corporations, are subject to legislative control as to the manner in which they may be exercised. Thus a statute providing that every contract for the purchase of supplies involving the expenditure of money beyond a fixed sum shall be let by competitive bidding is a limitation upon the power granted which would be completely nullified if the law should allow a recovery, either directly or indirectly, to one furnishing such supplies upon the order of municipal officers given in disregard of the statutory requirements. (Zottman v. San Francisco, 1862, supra; Hague
v. City of Philadelphia, 1865,
Statute re Competitive Bidding. The law of public corporations being primarily statutory, Montana's legislature has spoken and formulated the public policy of this state by providing, with *74 respect to municipal corporations, that "all contracts for work, or for supplies or material, for which must be paid a sum exceeding five hundred dollars ($500.00), must be let to the lowest responsible bidder." (Sec. 5070, Rev. Codes of Montana 1935, and Chapter 18, Session Laws of 1939, page 26.) These statutes are mandatory and prohibitory.
The above statutes are constitutional. They were intended to safeguard the interests of the city and its taxpayers. They were enacted by the legislature for the purpose of preventing favoritism and graft and to check municipal extravagance and corruption. (Fox v. Sloo, 1850, 10 La. Ann. 11; Fox v.City of New Orleans, 1857, 12 La. Ann. 154, 68 Am. Dec. 766.)
"All experience teaches the utter impossibility of wholly preventing unfairness, and advantage taken in the execution of public contracts, even with the most vigilant watchfulness of the public interest. * * * Now, more than ever, do we need a rigid enforcement of public contracts, and a stricter moral discipline, to defeat the varied plans by which money is taken from the treasury without authority. The older we grow as a people, the more systematized and difficult of detection do the schemes become for plundering the public; and among them all, none are more prominent or successful than those which concern contracts and jobs. The very elections of the people are sometimes guided and controlled by the unseen hands of rapacity. Fraudulent claims, fraudulent prices, fraudulent receipts, and fraudulent practices are often winked at or shared in by officials in disregard of honour, honesty, and oaths. Of course we know nothing, indeed no hint has been given to us, of the merits of this case, and our remarks have no relation to its facts. But we refer to those known devices and schemes of public plunder occurring so frequently, to vindicate the principle of our decision, and give forth a note of warning to those who may feel disposed to embark in such dangerous enterprises." (Hague v.City of Philadelphia, supra.)
The record herein shows that the statutes requiring competitive *75 bids and the letting to the lowest responsible bidder were disregarded and violated.
What results attend this willful disobedience of the law?
First. The law says: "Failure to comply with this statute renders a contract void." (Commonwealth Public Service Co. v.City of Deer Lodge, supra [
Second. "A municipality does not become liable for * * * goods upon principles of unjust enrichment where it is prohibited from contracting in any other than a specified way, as, for instance, with the lowest bidder." (Shulse v. Mayville,
Third. Respecting the vendor corporations, the law says: "Persons contracting with such artificial creations of the law as municipal corporations and public officers are charged with notice of the character and constitution of the entity with which they deal. They know the law, and know what are valid acts of such artificial persons. They contract at their peril. * * * If the contract in question were void, the plaintiff cannot recover thereon. The only authority that the commissioners * * * had to make the contract is found in the statutes above cited." (Lebcher v. Commissioners of Custer County, supra.) To the same effect see Missoula St. Ry. Co. v. City of Missoula, supra; *76 United States Rubber Co. v. Tulsa, supra; Western Paint Chemical Co. v. Garfield County,
Statute forbidding Interest in Contracts. Pursuant to the power vested in it by the Constitution, the legislature enacted section 5069, Revised Codes of Montana 1935, which provides: "The mayor, or any member of the council, or any city or town officer, or any relative or employee thereof, must not be directly orindirectly interested in the profits of any contract entered into by the council while he is or was in office." (Emphasis mine.) This statute is but declaratory of the common law.
"Independently of any statute or precedent, upon the general principles of law and morality, a member of an official board cannot contract with the body of which he is a member. To permit it would open the door wide to fraud and corruption. The other members of the board in allowing compensation thus to one of their members would be aware that each of them in turn might receive contracts and good compensation, and thus public office, instead of being a public trust, would become, in the language of the day, `a private snap.'" (Davidson v. Guilford County,
"When a person is inducted into an office he thereby becomes empowered to exercise its powers and perform its duties, not for his but for the public benefit." (People ex rel. Robertson v.Van Gaskin,
The statute must be obeyed. The express prohibitions so enacted by the legislature may not be ignored. He who disregards them does so at his peril.
When the legislature enacted section 5069, Revised Codes, and *77 other statutes of similar import, it intended that its mandates be obeyed. It placed teeth in the law by providing: "Every officer or person prohibited by the laws of this state from making or being interested in contracts, or from becoming a vendor or purchaser at sales, or from purchasing scrip, or other evidences of indebtedness, who violates any of the provisions of such laws, is punishable by a fine of not more than one thousand dollars, or by imprisonment in the county jail or state prison not more than five years, and is forever disqualified from holding any office in this state." (Sec. 10827, Rev. Codes.)
The executive department of this state, through its state examiner, warned the city officials that the sales and purchases so made in violation of the express statutes prohibiting same are serious matters. The law lays its heavy hand upon all who disobey or who aid and abet others in their unlawful design to directly or indirectly defeat the law and evade its mandates, irrespective of whether they are individuals or private corporations.
Disobedience spells ruin. For the offending city officials violation of the law results in disgrace. It brands the violator as a felon. It may take from him his money by the imposition of a fine. It may deprive him of his liberty. It denies to him forever the right to again occupy a position of public trust. As to the vendor corporations that participate in the unlawful design of the offending city officials, the law says, "They contract at their peril." (Lebcher v. Commissioners of Custer County, supra.) Disregard of the law may result in the insolvency, i.e., the financial ruin of such corporations. (McManus v. Scheele,
What are the results which attend the making of the contracts of sale with a municipality contrary to the public policy of the state and in violation of the express statutes forbidding same?
First. The legislature has provided that, "If any part of a single consideration for one or more objects, or of several considerations for a single object, is unlawful, the entirecontract is void." (Sec. 7506, Rev. Codes.) (Emphasis mine.) *78
Second. The legislature has provided: "That is not lawful which is: 1. Contrary to an express provision of law; 2. Contrary to the policy of express law, though not expressly prohibited; or, 3. Otherwise contrary to good morals." (Sec. 7553, Rev. Codes.)
Third. The legislature has provided that the disobedience of the sections 5069, 444 and 445, Revised Codes, constitutes a felony. (Sec. 10827, Rev. Codes.)
Fourth. The legislature has provided that the violation of such statutes is punishable by fine or imprisonment in the county jail or in the state prison. (Sec. 10827, Rev. Codes.)
Fifth. The legislature has provided further that the public officials violating such statutes shall be "forever disqualified from holding any office in this state." (Sec. 10827, Rev. Codes.)
Sixth. Contracts made in violation of such statutes so expressly forbidding same are contrary to public policy and absolutely and wholly void and of no legal effect. (Lebcher v.Commissioners of Custer County, supra; State ex rel. Lambert
v. Coad, supra; Missoula Street Railway Co. v. City ofMissoula, supra; Spaulding v. Maillet,
"Where a statute designed for the protection of the public prescribes a penalty, that penalty is the equivalent of an express prohibition, and a contract in violation of its terms is void." (McManus v. Fulton, supra [
Seventh. The law permits no recovery on such void contracts so forbidden by express statute either on a theory of implied contract or quantum meruit, or upon a basis of estoppel or laches *79
or upon the doctrine of unjust enrichment or upon any other equitable ground or consideration. (Missoula Street Ry Co. v.City of Missoula, supra; City of Northport v. NorthportTownsite Co.,
Eighth. Where a contract is of a class expressly forbidden by statute, the acceptance of benefits by the city raises no implied obligation on the part of the city to pay therefor. (State exrel. Helena Waterworks Co. v. Helena, supra; Helena W.W. Co.
v. City of Helena,
Ninth. Money paid by a municipal corporation upon a void contract may be recovered back by such corporation; or, in case the proper authorities refuse to do so, a taxpayer thereof may do so for the benefit of such corporation. (School District No. 2of Silver Bow County v. Richards, supra; Independent SchoolDistrict ex rel. Moore v. Collins, supra; Common SchoolDistrict No. 61 v. Twin Falls Bank Trust Co., supra; SiouxFalls Taxpayers Ass'n v. City of Sioux Falls, supra; Miller
v. McKinnon, supra; Ritchie v. City of Topeka,
Tenth. "In cases where the suit would be antagonistic to the interest of the officers of the corporation, or the circumstances such that it cannot be brought and directed by such officers without serious embarrassment to them, they are improper parties to bring the suit, and no demand on them is necessary." (Burns
v. City of Nashville,
Eleventh. "A void contract need not be rescinded." (12 Am.Jur. sec. 437, p. 1017.) "A void contract is no contract at all; it binds no one and is a mere nullity. * * * It requires no disaffirmance to avoid it and it cannot be validated by ratification. A contract wholly void is void as to everybody whose rights would be effected by it if valid." (12 Am. Jur., sec. 10, p. 507.)
Twelfth. "A purchase by a trustee or agent of the particular property of which he has the sale, or in which he represents another, whether he has an interest in it or not, — perinterpositam personam, — carries fraud on the face of it." (Michoud v. Girod, 4 How. 503, 553,
Thirteenth. The filing, as required by section 5071, Revised Codes, by the defendant corporations, with the city clerk of the statements under oath declaring that no person forbidden by law has any interest in the contracts could not have been truthfully *82 made under the circumstances here. To obtain the city's money by falsely making the required statement is to perpetuate fraud. To willfully and knowingly make such false statement under oath is to commit perjury.
Fourteenth. The plaintiff taxpayers were not required as a condition precedent to recovery to re-deliver or offer to re-deliver or restore to the defendant sellers the property received by the city under such forbidden contracts. (SchoolDistrict No. 2 of Silver Bow County v. Richards, supra; Stateex rel. Helena Waterworks Co. v. Helena, supra; Helena W.W.Co. v. City of Helena, supra; Missoula Street Ry. Co. v.City of Missoula, supra; Bay v. Davidson,
When the defendant corporations commenced to deliver merchandise to the city they knew the contracts were illegal. They supplied the goods with full knowledge of this fact. The defendant sellers were therefore not misled and they are not now in a position to assert that the plaintiff taxpayers were estopped to question the liability of the municipality. (Missoula Street Ry. Co. v. City of Missoula, supra.)
For the vendor corporations through their managing officers to aid and abet those same managing officers, as members of the city council, to violate the law, is to participate in such unlawful *83 intention. Thereby are the resulting contracts corrupted and made void. (6 R.C.L., Contracts, sec. 103, p. 698.)
"As a corporation is without sensibilities, it can only have vicarious knowledge of any fact, and the knowledge of its managing officers must necessarily constitute the knowledge required by the statute." (Daly v. Swift Co.,
The vendor corporations were parties to the forbidden contracts. One and the same set of individuals managed both the city and the vendor corporations. Not only did the defendant corporations participate in the unlawful design of the offending city officials but they received the profits of the enterprise. They reaped the fruits of the illegal and void contracts. They pocketed the money so illegally taken from the city's treasury and handed to them by their stockholder, director, city official, managing officer. This money they received with guilty knowledge of where and how it had been obtained. Like the chief priests who took the thirty pieces of silver, the defendant corporations should have said: "It is not lawful for to put them into the treasury." (Matt. 27:6.) Without right or warrant of law was this money taken from the city's treasury. The law requires that it be put back.
Reluctant to return the money to the city, the vendor corporations ask that the forbidden contracts be held merely voidable and not void. The legislature, however, has already branded them as illegal, unlawful and void as have the prior decisions of this court. "`A contract expressly prohibited by a valid statute is void. This proposition has no exception, for the law cannot at the same time prohibit a contract and enforce it. The prohibition of the legislature cannot be disregarded bythe courts.'" (McManus v. Fulton, supra.) (Emphasis mine.)
The doctrines of waiver, estoppel and laches have no possible application in cases such as these. There can be no waiver of any of the advantages of the statutes designed to protect the public and the legislature has expressly provided that "a law established for a public reason cannot be contravened by a private agreement." *84
(Sec. 8742, Rev. Codes. See, also, Ottumwa Ry. Lt. Co. v.City of Ottumwa, supra; Meek v. Wilson,
"The doctrine of estoppel by conduct or by laches has no application to an agreement or instrument which is illegal because it violates an express mandate of the law or the dictates of public policy. Neither action or inaction of a party to such an agreement can validate it; and no conduct of a party to it can be invoked as an estoppel against asserting its invalidity." (12 Am. Jur., sec. 222, pp. 740, 741.)
"A municipality or other governmental agency is not estopped to deny the validity of an act or contract beyond its power, and this rule has been applied although the public has accepted benefits or money has been expended on the faith of such act or contract. * * * The doctrine of estoppel may not be applied against a municipal corporation or similar body where the subject matter of the act or contract is illegal or malum prohibitum; nor may such a body be estopped to deny liability under a contract which is void." (31 C.J.S., Estoppel, p. 427, sec. 143.)
The plaintiffs herein are taxpayers of the city of Livingston and estoppel most certainly may not be invoked against them. They were not parties to the contracts. They had nothing whatever to do with the illegal purchases. "A person is not estopped from denying the validity of a contract to which he was not a party, and the particulars of which he did not know." (McManus v.Scheele, supra [
I cannot agree with the construction placed upon section 446, Revised Codes, by the majority opinion. While section 446 has not heretofore been construed by this court, yet courts of other jurisdictions have interpreted the same or similar statutes. (SeeSmith v. City of Albany, 1875,
Long before any of the contracts or transactions here involved were entered into, the attorney general of Montana, in his published opinion No. 133, Volume 15 of Attorney General's Opinions, 101, held void as against public policy a contract to build a school house where one of the school trustees letting the contract was the spouse of the contractor to whom the contract was awarded. In this opinion, he said: "Although the language of Section 446 might lead to the belief that the contract is merely voidable, yet, the contract being contrary to public policy, we think should be held to be absolutely void. (McManus v.Fulton, supra; Berka v. Woodward, supra; 13 C.J. 420, 425; 2 Page's Law of Contracts, Section 1020)." Again, in his OpinionNo. 183, Volume 15 of Attorney General's Opinions, page 131, the Attorney General held void, as violative of section 5069, Revised Codes, and as contrary to the public policy of this state, a contract for city lighting by a municipality and a lighting company in which the city mayor then was a stockholder.
In 1872, the California legislature re-enacted sections 1, 2 and 3 of the Act of 1851, the wording thereof being identical with sections 444, 445 and 446 of Montana's present Political Code. Long before Montana had enacted these statutes they had been *86 construed by the courts of both New York and California. The holdings of these courts are all against the construction given the statutes by the majority opinion herein.
In the early case of Smith v. City of Albany, supra, the court said: "The rule upon this subject, as well as the reason for it, is so clearly stated by the late Justice Story in his treatise on Agency, as to render a restatement of it in the words of its learned author quite appropriate. `It may,' he said, `be correctly said with reference to Christian morals, that no man can faithfully serve two masters whose interests are in conflict. If, then, the seller were permitted, as the agent of another, to become the purchaser, his duty to his principal and his own interest would stand in direct opposition to each other; and thus a temptation, perhaps in many cases too strong for resistance by men of feeble morals or hackneyed in the common devices of worldly business, would be held out, which would betray them into gross misconduct and even into crime. It is to interpose a preventive check against such temptations and seductions that a positive prohibition has been found to be the soundest policy, encouraged by the purest principles of Christianity. This doctrine is well settled at law. And it is by no means necessary in cases of this sort that the agent should make any advantage by the bargain. Whether he has or not the bargain is without any obligation to bind the principal.' While efforts have been made to evade this rule, its justice has never been questioned; it is a rule of necessity, which the test of experience has rendered inflexible. * * * The Act of 1843 (Session Laws of that year, p. 36) making it unlawful for a member of any common council of any city in this State to become a contractor under any contract authorized by the common council and authorizing such contractsto be declared void at the instance of the city, has not wroughta change in the rule referred to; it is, so far as it goes,simply declaratory of the law as it existed previous to itspassage. It does not encroach upon the common law, and is not,therefore, to be construed strictly." (Emphasis mine.)
In Santa Ana Water Co. v. Town of San Buenaventura, C.C., *87 65 Fed. 323, 327, a contract between town trustees and one Arnaz and associates was held absolutely void because one of the town's trustees was jointly interested with Arnaz and his associates in the subject matter of the contract. The court's interpretation of the California statute (identical with section 446, Rev. Codes), holding that same does not remove from the contract the character of absolute nullity, commends itself to me as sound law. In his opinion, Judge Ross said:
"* * * I am of the opinion that the contract was absolutely void, and not merely voidable. The common law, on grounds of public policy, prohibits a trustee from contracting with himself. So does the statute of California. (Hitt. Gen. Laws, p. 699; Pol. Code, secs. 920-922.) The state statute referred to contains the further provision that every such contract may be avoided by any party interested therein, except the officer or officers making the contract or having an interest in it; and it is contended for the complainant that the effect of this provision of the statute is to remove from such contracts the character of absolute nullity, and make them voidable merely. A similar statute of New York was held by the commission of appeals of that state to be merely declaratory of the common law so far as it goes, in the case entitled Smith v. City of Albany,
"A similar ruling was made by the same court in the more recent case of Davis v. Mining Co.,
It is also to be observed that section 446, Revised Codes, is specifically directed and applies only to "the two preceding sections" being the general sections 444 and 445, Revised Codes. It in no wise or manner refers to section 5069, Revised Codes, the violation of which constitutes a felony under section 10827, Revised Codes.
In Clark v. Utah Construction Co.,
I cannot agree that these actions are in equity; nor, that the plaintiff taxpayers have mistaken their remedy.
I view each count of each complaint as an action at law to recover a money judgment ascertained and certain in amount. (Judith Inland Transportation Co. v. Williams,
The right of plaintiffs to maintain these suits to recover the moneys alleged to have been illegally expended is recognized in the decisions of this court though not specially granted by statute. "The right of the plaintiff to maintain the action cannot be questioned. This is a taxpayer's suit, but the judgment recovered inures to the benefit of the school district. Plaintiff could gain nothing from a successful termination of the action except the benefit common to all taxpayers which would accrue from preserving the public funds from unlawful dissipation." (School District No. 2 of Silver Bow County v. Richards, supra [
Under the circumstances here, the plaintiff taxpayers were not required by either the law or common sense to do the impossible and restore to the vendors the merchandise which had been consumed. Where the goods are no longer in specie and where, through no fault of plaintiffs, restoration has been rendered impossible or impracticable, plaintiffs may still recover the moneys so illegally expended from the public treasury. Even though the property had not been consumed, still the plaintiff taxpayers "had no more authority than a stranger to redeliver, or offer to redeliver, the property to the seller." (SchoolDistrict No. 2 v. Richards, supra.) It is true that in their answers defendants have pleaded certain equitable defenses but the complaints, presenting as they do actions at law, are not changed into *90
actions in equity by the interposition of such defenses. (Smith
v. Barnes,
In Noxubee County Hardware Co. v. City of Macon,
"The state cares nothing about Holberg or Horton, or their concerns. The state cares everything that the salutary principle of public policy embodied in this section 109 shall be faithfully and fearlessly carried out, so as to prevent graft of every possible sort, and secure the honest and clean administration of municipal affairs. * * * The town of Macon will come by its proper rights when both these gentlemen resign as aldermen and resume their business as merchants, which, in view of the provision of section 109 of the Constitution, we have no doubt they will promptly do. It may be that they have acted in actual ignorance of the true construction of this section. They will be without that excuse in the future. In this day of almost universal trouble in municipalities all over these United States in respect to an absolutely fair, clean, and impartial administration of municipal affairs, it is of the very last importance that a constitutional provision *91 like the one here involved shall receive at the hands of this court a construction that will make impossible any maladministration along this line in city affairs."
That the vendors are corporations does not relieve them from the results attendant to entering into void contracts with the city council. "Corporations are not emancipated from the binding effect of the clause in question. A corporation would endanger its very existence if it were to engage in such joint works with officers of a municipality or in any other venture in face of a positive prohibition in public interest." (McManus v.Scheele, supra.)
The merchandise supplied to the city by the defendant corporations consisted of coal, cement, lumber, tile, hardware, building materials, chemicals, gasoline, oil and various other supplies and materials, all of which had been consumed before the suits were commenced. A different rule applies in such cases than where the merchandise remains in specie. When the goods are still in specie and title has failed to pass by reason of the contract of sale being void, usually the vendor may retake his property without serious inconvenience to the municipality. However where it is physically impossible to return the goods to the vendor because of their consumption, then the rule is that the municipality is not liable, even for the reasonable value of the merchandise so consumed. This distinction is recognized inMunicipality of Rio Piedras v. Serra, Garabis Co., 1 Cir. 1933,
In the annotation in 93 A.L.R. at page 442, it is said: "The general rule is well established that where, under a contract which is merely invalid and not fraudulent or malum in se, one has furnished to a municipality or other political subdivision, *92 real or personal property, whether or not enhanced by his own labor, which property the public fails to pay for, he may upon equitable terms recover it in specie, if recovery may be had without material injury to other property and without causing the public any inconvenience other than results from depriving it of that to which it has no just claim."
The above general rule is not applicable here for the reasons: (1) The merchandise delivered is no longer in specie; (2) the contracts here involved are forbidden by express statutes; (3) the contracts are against public policy; (4) they are presumptively fraudulent; (5) recovery of the property may not be had without material injury to other property; and (6) as to the consumed property, it is physically and wholly impossible to return same.
In 6 R.C.L., Contracts, section 98, pages 692, 693, it is said: "At no time in the history of the common law were contracts in violation of law regarded as valid. Individuals were never allowed to stipulate for iniquity. A contract, though it may be based on consent, derives its obligatory force from the sanction of the law. It would therefore be anomalous indeed if the law were to sanction contracts which violate the law. The law, which prohibits the end, will not lend its aid in promoting the means designed to carry it into effect. It will not promote in one form that which it declares wrong in another. The whole doctrine relating to illegal contracts is founded on a regard for the public welfare. In fact, it has been asserted that the maintenance of this doctrine is essential to the preservation of the state."
"* * * Dealings between a public officer and himself as a private citizen, that bring him into collision with other citizens equally interested with himself in the integrity and impartiality of the officer, are against public policy. * * * The reason is that in such case the member's public duty and his private interests are directly antagonistic. It matters not if he did in fact make his private interests subservient to his public duties. It is the relation that the law condemns, not theresults. It might be that in a particular case public duty triumphed in the struggle *93 with private interests; but such might not be the case again or with another officer, and the law will not increase the temptation or multiply opportunities for malfeasance. Neither will it take the trouble to determine whether in any case the result show a wrong or crime, but it absolutely and unequivocally refuses its sanction to any contract of any kind whatever where such relation exists." (6 R.C.L., Contracts, sec. 145, pp. 739, 740.) (Emphasis mine.)
Morse v. Granite County,
Argenti v. San Francisco,
In State ex rel. Lambert v. Coad, supra, this court applied the doctrine of the Zottman case, supra. In MissoulaStreet Ry. Co. v. City of Missoula, supra, this court again expressed its approval and followed the doctrine there announced. In the Missoula Street Ry. Co. case, supra [
Both the Argenti case, supra, and Morse v. GraniteCounty, supra, are cited in 93 A.L.R. at pages 442 and 444 in support of the rule there announced respecting the return of property illegally sold but remaining in specie. School DistrictNo. 2 of Silver Bow County v. Richards, supra, was a case of the above character, the property consisting of a victrola and a piano. These articles, of course, remained in specie. They could therefore be returned to the vendor without material injury to other *96 property although the plaintiff taxpayer was not required to either restore the articles or to offer to restore same to the vendors.
In Bay v. Davidson,
In State ex rel. Helena Waterworks Co. v. Helena, supra [
"The importance of this case, because of the questions and amount involved, and the rights necessarily to be determined, has led us to give it most careful consideration, and, after so doing, we are of opinion that the judgment of the court below should be affirmed; and it is so ordered."
The above decision was later expressly approved by this court in Helena W.W. Co. v. City of Helena, supra [
State ex rel. Northwestern National Bank of Great Falls v.Dickerman,
It appears to me that the majority opinion overlooks the fact that different rules must be applied to the two different situations. These distinct rules are recognized by the author of McQuillin *98 on Municipal Corporations wherein the rule applicable to liability to refund money is stated thus, "However, it is well settled that the doctrine of ultra vires cannot be invoked by a corporation, in the absence of some prohibitory law, to protect itself from liability to refund money which it has received and had the legitimate benefit of." (3 McQuillin Municip. Cor., 2d Ed. sec. 1274, p. 820.)
"On the other hand it is doubtful if there are any cases which hold that where a contract is of a class expressly forbidden by charter or statute, the acceptance of benefits raise an implied obligation." (3 McQuillan Municip. Cor., 2d Ed., sec. 1274, p. 820. See Edison Electric Co. v. Pasadena, 9 Cir.,
In Independent School District No. 5 v. Collins, supra [
"The general rule is that a taxpayer has a right to maintain an action to recover back money illegally paid on behalf of a municipal corporation when the officers neglect or refuse to perform their duty in that respect." (Citing cases.)
The above case was cited with approval by this court inSchool District No. 2 v. Richards, supra. To same effect see the recent case of Sioux Falls Taxpayers Ass'n v. City ofSioux Falls, 1942, supra.
In McNay v. Town of Lowell,
"Courts are but human, and we are prone to let our sympathy for the one who with honest motives has subjected himself to heavy pecuniary loss lead us to relax the rigors of established legal principles. Therefore it has been said: `Hard cases frequently made bad law.' But while the unfortunate position of appellant is to be regretted, under the facts disclosed, we, as a court, must be controlled by the imperative demands of the law applicable thereto, and have no power to grant either legal or equitable relief. (Moss v. Sugar Ridge Tp., supra [
There can be no doubt about the legislative intent nor the public policy of this state. You "must not" do it. This is the language of the statutes. Not only once but repeatedly is this positive, simple, and unmistakable command given to the municipal officers by the legislature. (See secs. 444, 445, 447, 449, 5069, and 5071, Rev. Codes of Montana.)
The legislature had the power to enact the above statutes and having enacted them this court ought to accept the law as it finds it. We are prohibited from exercising the powers properly belonging to the legislature. (Constitution of Montana, Art. IV, sec. 1.) We should not, by judicial construction, nullify the express legislative mandates. "`Our duty is not to enact, but to expound the law; not to legislate, but to construe legislation, to apply the law as we find it, and to maintain its integrity as it has been written by a co-ordinate branch of the state government.'" (Nichols v. School Dist. No. 3,
Recognition of the right of the defendant corporations to restitution or to retain the moneys which have been illegally taken from the city's treasury and delivered to them, is but a method of invalidating the mandates of the prohibitory statutes *101 in question. Such equities as might otherwise surround defendants, if a question of public policy were not involved, must yield to the plain and express statutory provisions. The statutes were enacted by the legislature for the general welfare and protection of the public and particularly the taxpayers of the defendant city. To brush these statutes aside and to permit the defendant corporations to retain the money thus illegally taken from the city's treasury, not only in direct violation but in deliberate defiance of the mandates of the legislature, would leave the public without the protection conferred by the legislature.
"To permit the recovery such as this is supported by the great weight of authority. It applies to this case because the transaction in question is against the public policy and in violation of law." (Sioux Falls Taxpayers Ass'n v. City ofSioux Falls, 7 N.W.2d at page 140, decided by the supreme court of South Dakota, December 17, 1942.) Here have we found the rule and we should apply it to the cases presented. We have not the authority to invade the field reserved for the legislative department and change the rule. (Constitutional Law, 11 Am. Jur. sec. 198, pp. 900, 901.) This is a government of laws and, the laws enacted by the legislature cannot be disregarded by the courts. (McManus v. Fulton, supra.) While in the eyes of the law the confirmed criminal is as much entitled to redress as his most virtuous fellow citizen and no record of crime however long makes one an outlaw yet, when it appears that he who seeks the court's aid has violated the law in connection with the very transaction as to which he seeks legal redress then must that aid be denied him. It is denied in order to maintain respect for law; in order to promote confidence in the administration of justice; in order to preserve the judicial process from contamination.
Plaintiffs' demands are founded on right, justice and law. The defendant corporations should be required to pay back into the public treasury the moneys illegally taken therefrom and delivered to them, for they took it with full knowledge that it was "hot."
I think the judgment in each case should be reversed and that *102 the causes should be remanded to the district court with directions to enter judgments in favor of the plaintiff taxpayers who have been wronged.
Dissenting Opinion
I concur in the dissenting opinion of MR. JUSTICE ADAIR.
Rehearing denied October 11, 1943.
