Powell v. Maguire, No. 2,333.

No. 2,333. | Cal. | Jan 5, 1872

Lead Opinion

In the year 1866 the Legislature granted to the defendant, "his associates and assigns," a franchise authorizing him or them to establish, and for twenty (20) years to maintain, a steam ferry between Vallejo and Mare Island. Shortly after obtaining the franchise the defendant constructed a steam ferry-boat at his own expense, and in the Spring of 1867 commenced, and has ever since continued, to use her as a ferry-boat between said points. The plaintiff claims that, before the franchise was obtained, he and the defendant had entered into a parol agreement, to the effect that they would jointly, at their mutual expense and for their mutual benefit, establish and operate a steam ferry between said points; and as a part of said agreement, it was further understood and agreed that they would, if practicable, obtain from the Legislature, for their joint and mutual benefit, a franchise authorizing the establishment of said ferry, with the right to operate the same; that it was agreed between them that the franchise should be obtained in the name of the defendant and his associates, and the plaintiff, through his friendly relations with the Senator from that district, was chiefly or wholly instrumental in procuring the franchise to be granted; that immediately after the franchise was obtained, he applied to the defendant to convey or assign to him one half of it, in accordance with their previous agreement; that the defendant at first promised to make the transfer, but evaded doing so from time to time, and finally expressly refused; and commenced, and has ever since continued, to operate the ferry for his own emolument, denying the plaintiff's right to participate therein. The action is brought to establish the plaintiff's right to one half the franchise and ferry, and for an accounting. The answer explicitly denies that there was any understanding or agreement to the effect that the plaintiff was to have any interest whatever in the franchise or ferry, or that he is entitled to participate in any manner therein. At the hearing the Court decided the issues in favor of the plaintiff, and after an accounting was had entered a judgment accordingly. The defendant appeals, as well from the judgment as from an order denying his motion for a new trial.

Upon the plaintiff's own showing the contract was, at most, but an agreement to form a partnership, to take effect when the franchise was obtained; but it clearly appears that the partnership was never launched. On the contrary, the defendant proceeded, shortly after obtaining the franchise, to construct a steam ferry-boat, at his own expense, and for his own exclusive use, and has ever since used her for maintaining the ferry, at his own cost and for his exclusive benefit, denying the plaintiff's right to participate therein, and excluding him from the management and control thereof. Upon these facts, it is obvious that if the plaintiff's rights rested solely on a verbal agreement, to the effect that he and the defendant would establish and maintain the ferry at their joint expense, and for their joint benefit, without reference to the franchise, the plaintiff's only remedy would be an action at law for a breach of contract. He would have no right to participate in the profits of an enterprise to which he had contributed nothing, and could claim no interest in a boat constructed by the defendant, at his own expense, and for his own use, nor in the earnings thereof. In such cases it is well settled that, when the partnership was never launched, and when one of the copartners has proceeded to conduct the enterprise in his own name, at his own cost, and for his own exclusive benefit, excluding the other party therefrom, and repudiating the partnership agreement, the only remedy of the injured party is an action at law for a breach of contract. There would be in such a case, no existing partnership, but only an agreement to form one, which was never consummated by launching the enterprise. But it remains to be considered whether the plaintiff stands upon a better footing, because there was coupled with the contract a further agreement that, in furtherance of the enterprise, they would obtain, as they afterward did, the ferry franchise in the name of the defendant, his associates and assigns, for their joint benefit. Upon this branch of the case the first inquiry is, whether a Court of equity, upon the facts stated in the complaint, will decree the defendant to be a trustee, holding the legal title to a moiety of the franchise for the use of the plaintiff. In Miles v. Thorne, 38 Cal. 335" court="Cal." date_filed="1869-07-01" href="https://app.midpage.ai/document/miles-v-thorne-5436989?utm_source=webapp" opinion_id="5436989">38 Cal. 335, we had occasion to consider a somewhat similar question. In that case it appeared that Thorne, at his own expense, had constructed and maintained a wagon road for public travel; but the road having gotten out of repair, he desired to obtain from the Legislature a franchise authorizing him to reconstruct the road, and to collect tolls thereon; and with this view he agreed with Miles, that if the latter would prepare a proper bill for that purpose, and present it to a member of the Legislature for introduction into that body, he would convey to Miles one half the franchise, when obtained. It further appeared that after the franchise was obtained in the name of Thorne, the agreement was renewed, and Miles was placed in possession of one half the road, which he repaired at his own expense — Thorne repairing the other half, and collecting tolls on the whole road. The action was brought to compel a conveyance of one half the franchise, and for an accounting. On these facts, we held that the contract was not contra bonos mores, and that the plaintiff was entitled to the relief demanded. But, in the case at bar, the facts are quite different — the plaintiff has not been let into possession, nor expended any time, labor, or money under the franchise, but rests solely on his naked right under the antecedent verbal agreement, to compel the defendant to convey to him a moiety of the franchise. In my opinion, principles of public policy forbid that a Court of. equity should enforce such a trust, resting wholly on an antecedent agreement, that some one else beside the beneficiary named in the statute was to participate in its benefits, in virtue of a secret understanding between the parties to that effect. Such a practice, if sustained by the Courts, would naturally lead to powerful combinations to procure vicious and corrupt legislation in the name of the least obnoxious of the parties, on an agreement of the confederates to divide the spoils between them. When the Legislature grants a franchise to a particular person, his associates and assigns, it delegates to him the right to select the person thereafter to be associated with him in the enterprise. After obtaining the franchise, if he shall then, by a new contract upon a proper consideration, and in due form, agree to convey a portion of it to another, or if he shall afterwards ratify an antecedent contract otherwise unobjectionable, as in Miles v. Thorne, and shall let the party into possession, thereby causing him to expend his time, labor, or money in furtherance of the enterprise, as was done in that case, there can be no doubt that a Court of equity would enforce such a contract. But if several persons desiring to obtain a franchise from the Legislature, in which they are all to be mutually interested, see fit to ask it in the name of one only, public policy requires that they should be made to rely solely on his good faith in carrying out the agreement; and if he repudiates the contract on obtaining the franchise a Court of equity will grant no relief. It may be that, if the Legislature had known beforehand who the real parties in interest were, they would not have made the grant; and if the Courts could be appealed to, to enforce such secret antecedent agreements, unsupported by any subsequent acts of the ostensible beneficiary, it is evident that powerful secret combinations would be formed to procure vicious legislation under false pretenses. What might appear to be a harmless or beneficial enterprise under the control of one person of good character, might prove to be a very dangerous and pernicious scheme in the hands of twenty secret associates of bad character, and to whom the Legislature might have refused to make the grant, if their interest had been disclosed on the face of the bill. I think the rule adopted in Miles v.Thorne ought not to be extended beyond the facts of that case; and I am, therefore, of opinion that a Court of equity ought not to enforce the verbal agreement set up in the complaint, to the effect that it was agreed before the franchise was obtained that the plaintiff was to be equally interested in it with the defendant. In my opinion the judgment should be reversed, and the cause remanded, with an order to the Court below to dismiss the action.

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Concurrence Opinion

I concur in the foregoing opinion and judgment, and I am of the opinion that the franchise in question is real estate; that in its transfer it is to be governed by the rules applicable to the transfer of title to other real estate — the provisions of the Statute of Frauds, and the rules in equity, respecting the creation of trusts — and that the evidence in this case fails to show the creation of a trust in favor of the plaintiff within those rules.

Mr. Chief Justice SPRAGUE did not participate in the foregoing decision.