36 Ind. 60 | Ind. | 1871
This was a proceeding instituted by the appellees to enjoin the appellants from paying any money on a contract for the construction of a gravel road. There were seventeen plaintiffs, who allege that they were tax payers and owners of real estate, and had been assessed for the construction of said road. The defendants were the directors and officers of the College Corner and Western Gravel Road Company. A temporary injunction was granted by the judge in vacation.
¡ The defendants moved the court, in term time, to dissolve \the injunction, which was overruled, and an exception was taken. The defendants then moved the court to strike out portions of the complaint, and this was overruled, and an exception taken. The defendants then demurred to the complaint, which was overruled, and an exception taken.
The defendants then answered in three paragraphs, and a
The cause being at issue on the general denial, was put to trial before a jury, and some ten interrogatories were put to the jury and by them answered; which finding of the jury the defendants, at the proper time, asked the court to set aside, which the court refused, and defendants excepted. And the court, upon the answers of the jury to the interrogatories, rendered final judgment and perpetually enjoined the payment of the money upon 'the said contracts. A motion to set aside the finding of the jury and the judgment of the court was then made, overruled, and excepted to.
A motion for a new trial was made, overruled, and excepted to; and an appeal was prayed and granted, and thirty days’ time was given the defendants, in which to prepare and file bills of exceptions. This was on the 25th day of December, 1869. It further appears from the record, that the bill of exceptions was not filed until the 29th day of January, 1870, which was more than thirty days from the time of granting the leave.
There are twenty-one assignments of error, but none of them are available here but the nineteenth and twentieth, which are based upon the action of the court in overruling the demurrer to the complaint, -and in sustaining one to the second and third paragraphs of the answex-. All the other errors assigned must be reserved by a bill of exceptions. It is a well settled rule of practice in this court, that where time is given extending beyond the term, in which to file bills of exceptions, they must be filed within the time limited, or they will constitute no part of the record; and a bill of exceptions is no part of the record, unless the record shows when it was filed. See Simonton v. The Huntington, etc., Co., 12 Ind. 380; Peck v. Vankirk, 15 Ind. 159; Lake Erie, etc., R. R. Co. v. Loveland, 14 Ind. 291; Roloson v. Herr, 14 Ind. 539; Terre Hatite Gas Co. v. Teel, 20 Ind. 131; Brouse v. Price, 20 Ind. 216; Moss v. Kendall, 20 Ind. 485 ; Swinney v. Nave, 22 Ind. 178; Farnsworth v. Coquillard's
The first available error is based upon the action of the court in overruling the demurrer to the complaint. Did the facts stated in the complaint constitute a good cause of action, and entitle the plaintiffs to the relief prayed for? The complaint and exhibits cover fifty-five pages of the record, but we will try to give an abbreviated and condensed abstract of the principal facts stated, that will present the grounds upon which the action was based, and render our ruling intelligible.
The complaint alleges that in March, 1867, the commissioners of Union county, Indiana, granted a permit to organize a gravel road company under, and by virtue of, the act of 1865 ; that in April, 1867, the company was organized, elected officers, and adopted articles of association and bylaws, which were filed in the recorder’s office of Union county; that surveys and estimates were made which required a road to be made with gravel, sixteen feet wide, fifteen inches deep in the center, and nine inches deep at the sides, and upon which surveys and estimates of the engineer the taxes were levied by the auditor of said county, and assessed and apportioned, which was in all things in conformity with the laws and the said articles of association; that the aggregate sum assessed against the plaintiffs amounted to $-; that the defendants, as individual stockholders, were opposed to the construction of said road, and had done all in their power to prevent its construction, and to that end had instituted suits to have the corporation dissolved, upon the ground that it had not been legally organized; that since their election as directors ,and officers, and with the open and avowed purpose of defeating the .construction of the said road, and with the express design of defeating the objects and purposes for which the said company had been organized, they had fraudulently confederated, com
Was the complaint good ? We think it was. There are many allegations of fraud, irregularity and unfairness in the complaint, but we only propose to examine one objection that is urged to the legality and validity of the contracts for the construction of the road.
It is charged in the complaint that the contracts were given to two persons, one of whom was a director of the company; and that the other contractor had an illegal and corrupt understanding with the directors that he was to share the profits with them.
The question presented for our consideration and decision • is, can a director in an incorporated company become a contractor with the company, or can he have any personal and pecuniary interest in a contract between the company of which he is a director and a third person ? We think the law is well settled, both in England and in this country, that he cannot. In the case of The Aberdeen Railway Company v. Blakie, 1 Macq. Ap. Cas. 461, the House of Lords, reversing the judgment of the court below, held that a contract entered into by a manufacturer for the supply of iron furnishings to a railway company of which he was a director or the chairman at the date of the contract, was invalid, and not enforceable against the company.
Lord Cranworth, in delivering the opinion of the court, says: “A corporate body can- only act by agents, and it is, of course, the duty of those agents so to act as best to promote the interest of the corporation whose affairs they are
The three leading cases in this country are Michoud v. Girod, 4 How. U. S. 503 ; Coal and Iron Company v. Sherman, first published in vol. 8 Am. Law Reg. 334, and afterward reported in 30 Barb. 553; and The Hoffman Steam Coal Company v. Cumberland Coal and Iron Company, 16 Md. 456. In these cases will be found a full, able, and exhaustive discussion of the question, and a thorough examination of the English and American cases.
The Supreme Court of New York, in Coal and Iron Company v. Sherman, supra, say: “Nay, the rule, as applicable to managers of corporations, should in no particular be relaxed. Those who assume the position of directors and. trustees, assume, also, the obligations which the law imposes on such a relation. The stockholders confide to their integrity, to their faithfulness, and to their watchfulness the protection of their interests. This duty they have assumed; this the law imposes upon them; and this those for whom.'
The learned judge, in the same opinion, says: “Neither are the duties and obligations of a director or trustee altered from the circumstance that he is one of a number of directors or trustees, and that this circumstance diminishes his responsibility, or relieves him from any incapacity to deal with the property of his cestui que trust. The same principles apply to him as one of a number, as if he was acting as a sole trustee. It is not doubted that it has been shown that the relation of the director to the stockholders is the same as that of the agent to his principal, the trustee to the cestui que trust; and out of the identity of these relations ■necessarily spring the same duties, the same danger, and the .same policy of the law. The number of directors or trustees does not lessen the danger or insure security that the interests of the cestui qiie trust will be protected. The moment the directors permit one or more of their number to ■deal with the property of the stockholders, they surrender their own independence and control. If five directors permit the sixth to purchase the property entrusted to their care, the same thing must be done with the others if they desire it.”
All experience demonstrates that the increase of the number of the agents in no degree diminishes the danger of .unfaithfulness. Whichcote v. Lawrence, 3 Ves. 740, was a case of several trustees. In this case Lord Loughborough says: “There are more opportunities for that species of
Judge Davies, in the New York case above quoted from, says : “After a most careful and patient Investigation of the ■facts in this case, and the numerous authorities cited in the protracted and very able arguments made by the learned counsel for the respective parties in this cause, I have arrived at the conclusion, entirely clear to my own mind, that this 'deed of sale and contract cannot be sustained. To hold otherwise, would be to overturn principles of equity which have been regarded as well settled since the days of Lord ’Keeper Bridgman, in the 22d of Charles II., to the present time—principles enunciated and enforced by Hardwicke, 'Thurlow, Loughborough, Eldon, Cranworth, Story, and Kent, and which the highest courts in our country have ■declared to be founded on immutable truth and justice, and ■to stand upon our great moral obligation to refrain from placing ourselves in relations which excite a conflict between self-interest and integrity.”
The case under consideration affords a fine illusti-ation of the danger of permitting a conflict between self-interest and integrity. It is -alleged in the complaint that when the proposals were received and contracts made, it was announced by the directors and understood by the bidders, that the contractors would be required to remove the earth from the gravel, and that after one -of the directors had become a contractor, and others pecuniarily interested in the other contract, the board of directors passed an order imposing upon the company the labor and expense of removing such earth, thus increasing the costs of construction to the stockholders some sixteen hundred dollars, which went into the pockets of the contractors. The court committed no error in overruling the demurrer to the complaint.
The defendants answered in three paragraphs: first, the general denial. The second paragraph contains a long and
From a careful examination of this paragraph we have been unable to find any allegation of a fact that could not have been proved' under the denial. It should have been stricken out on motion, but the judgment should not be reversed because a demurrer was sustained to it, as it resulted in no injury to the appellants.
The third paragraph alleges, that on the 27th day of July, 1869, the board of directors of the said company passed an order that the said road should be built of gravel, eight feet wide, twelve inches thick in the center, and six inches at the sides, and that the company should strip the earth from the gravel; that notice was given that lettings would be had thereon ;, that due notice was given of such lettings, and bids were received' and- contracts awarded according to the said order of the said board of directors; and that the road was being constructed under and in pursuance of the said order adopted on the said 27th day of July, 1869.
The contracts were made on the 12th day of August, 1869. The'complaint alleges that the order changing the width and depth of the road, and requiring the company to remove the earth from the gravel, was made and adopted after the letting and awarding of contracts; and that the bids were made and contracts awarded with the understanding that the road was to be sixteen feet wide, and the gravel was to be eighteen inches in the center, and gradually slope to nine inches at the sides.
It will certainly require no .argument or reference to
The court committed no error in sustaining the demurrer to the third paragraph of the answer.
The judgment is affirmed, with costs.