27 Wash. 42 | Wash. | 1901
The opinion of the court was delivered by
Appellants are now, and prior to the 13th day of July, 1886, were, husband and wife. On and prior to the date above named they were the owners of cer
*44 “For the mutual advantage and accommodation of the parties hereto, it is hereby agreed that for ninety days from and after this date, and so much longer as may be mutually agreeable to the parties concerned, the division of lots, by quarter blocks, in the town of Cle Elum, Wash. Terr., contemplated and provided for in that certain bond for deed, executed and delivered by Walter J. Reed and Barbara A. Reed, his wife, to Thomas Johnson, shall be, and hereby is, deferred, and that pending the termination of this agreement through lapse of time or mutual consent the sale of lots in the town aforesaid shall be conducted indiscriminately; the proceeds being divided equally between the said Walter J. Reed and Thomas Johnson, their heirs, legal representatives, or assigns. Upon termination of this agreement as above provided, the division of lots provided for, by quarter blocks or fractional parts thereof, shall then be made, in so far as practicable, according to the terms and conditions of the bond for deed hereinbefore referred to.”
The appellants brought this suit against respondents, and in the complaint allege that the lands platted as above stated, and known as the “Town of Ole Elum,” are the only lands that have been platted under the said contracts between the parties. It is also averred that appellants, since the execution of said contracts, have paid out large sums of money from their own personal funds forthemaintenance and benefit of the town site so platted, which sums have not been repaid to them by any one or in any way, and which are a charge against said platted town site and the proceeds thereof; that appellants have advanced said Thomas Johnson large sums of money at divers times since July 26, 1886, on account of the interest of respondents in said town site under said contracts, which amounts were to be charged against the interests of respondents therein, and the same have not been paid; that said Thomas Johnson has received large sums of money from
No error is assigned as to the finding of the court on the question of accounting. It is assigned as error that the court granted the demands of respondents as to any lands outside of the original plat of the town site of Ole Elum, and also that the court refused to find that respondents were barred by the statute of limitations as to any demands concerning lands outside of said original plat. We will, however, confine ourselves to the discussion of the following assignment of error:
“The court erred in decreeing the conveyance of any of the lands mentioned in the contract on July 13, 1886, for the reason that said contract is void because of uncertainty, lack of mutuality, want of consideration, and as being against public policy.”
It will be remembered that the consideration for the original agreement between the parties was stated to be the efforts of respondent Thomas Johnson to secure the establishment of a railroad depot by the Northern Pacific Railway Company within the boundaries of the same section which included the lands of appellants. The respondent Johnson stated in his testimony that he had an agreement with three officers of the Northern Pacific Railway Company by which each was to receive a one-fourth interest in the proceeds of whatever lots appellants would convey under their said agreement with Johnson. The consideration for the agreement between these officers and
“Q. In regard to the interest which Huson and Buckley and Bullock had, — how did that in any way affect the interest of Mr. Reed ? A. It didn’t affect him any. Q. In whose interest did they have an interest? A. In mine. I gave them one-eiglith of all the money that I got until after the railroad was complete, in ’88, for their services in the railroad line and putting the depot at Cle Elum. Q. Mr. Johnson, what was the com sideration which you gave Mr. Reed for entering into this contract ? A. I gave him consideration that I would have a depot there established. I would have the railroad line, changed from the west side on the south over on that side, which I did, and had to pay for it, though. Q. Row, who had any interest in this, besides yourself, in this deal with Reed? A. During all that time, Mr. Bogue and Iluson. Q. Any one else? A. Mr. Bullock. Q. And you accounted to them for half the money that you got ? A. I accounted to them for one-eighth of the money, — • each one of them. . Q. Mr. Johnson, you stated that certain gentlemen connected with the Northern Pacific Railway Company had an interest with you in those lots. Has that- interest been extinguished? A. They had no interest in the lots with me; they had an interest in the money that I got for the sale of lots at the time they were building the railroad. Q. They had an interest for whatever lots you should sell while they were building? A. While they were building, they got their money on it. Q. That is all the interest ? A. That is all the interest they had. Q. Whether that would he one lot or ten lots, they should have an interest in whatever money ? A. Each one of them had an interest in one-eighth of the money that we took in for the sale of the lots. Q. Did you make this agreement before or after you made*49 your contract with Reed? A. I think it was before. Q. Did they have any interest in any unplatted portions of this land? A. They had no* interest in any of the ground, but the money that we sold lots for. If we sold the whole thing, they got, each of them, an eighth. Q. That was the extent of the contract? In other words, they took you for one-half of the money, — all your interest from the sale of the lots during the time the railroad was being constructed ? A. Ho; they didn’t take my half of the money, at all. Q. One-half of the interest ? A. They took — My interest was divided into four parts. The sale of the lots was divided into four parts, and the money was divided. Q. During the time the railroad was being constructed from where ? A. To Tacoma, from where it was already built to. Q. The amount of their interest depended upon the length of time they were to keep the railroad building ? A. We were not very particular about it. We didn’t stick them right down to it. They got a good deal of money after the railroad was built.”
The above testimony was undisputed. Appellants proposed the following finding of fact based upon said evidence :
“That the agreement hereinbefore mentioned was entei’ed into by the said Thomas Johnson for axxd on behalf of certain officers of the Horthern Pacific Railroad Company, who then had charge of the construction of the line of railway of the Horthern Pacific Railroad Company, through axxd near said lands, axxd that the consideration of said contract was that said officers having charge of the location of said line of railway shoxxld locate the depot of said railway company within the limits of said tract of land.”
Said proposed finding was by the court refused, and exceptioxx thereto was taken. Appellants also proposed the followixxg conclusion of law:
“That said agreement aforesaid having been made for and on behalf of the officers of a public corporation known as the Horthern Pacific Railroad Company, and whose*50 duty it was to locate depots at such points as would suit the public needs and convenience, and the sole consideration for said agreement being the location of said depot for the use of the public upon the above-described lands, the said agreement was and is without consideration and void.”
Said proposed conclusion was refused, and exception was thereto taken. In refusing to make said finding and conclusion, we think the court materially erred. The respondents by their cross complaint were asking for a specific performance of the contract, by decreeing a conveyance to them of the lands claimed by them under their contract. Before they are entitled to the relief of specific performance, it must appear that the contract which they seek to enforce has all the elements of an enforceable contract. If the contract is illegal and void for reasons of public policy, specific performance will not be enforced.
“Equity will not assume jurisdiction to compel the specific performance of a contract that is illegal in any of its features. If the nature of the contract is such that its enforcement would be in violation of public policy, specific performance will not be granted. The least taint of illegality or want of equity will preclude a decree.” 22 Am. & Eng. Enc. Law, p. 1014, par. 4.
Was the contract between the parties here such as is contemplated in the above statement of the law ? It is a general rule that contracts which tend to place the officers of a corporation under an inducement to disregard their duties to the corporation, and to decide questions affecting the action of the corporation from a standpoint other than that of the best interests thereof, are illegal and void. The evidence in this case discloses that certain officers of the Northern Pacific [Railway Company, in consideration that they should receive a portion of the pro
In the case of Bestor v. Wathen, 60 Ill. 138, a contract was involved which was similar to the one here under consideration. The construction firm that was building the railroad, together with the president of the railroad company and another of its directors, and also its construction agent, entered into a contract with the owners of 160 acres of land situated where the road then in process of construction was expected to cross the Illinois.Central Railroad, by the terms of which the owners agreed to sell the first-named parties an interest in the land. Ro money was to be paid by the purchasers, but the land was to be laid out into town lots and sold. The first proceeds of the same, to the amount of $4,800, were to be retained by the owners, and when this sum was received they were to convey to the other parties an undivided half of the residue of the land. The only consideration for the agreement was that the so-called purchasers should “aid, assist, and contribute to the building up of a town on said land.” Precisely as is sought by the cross bill in this case, the so-called purchasers in. that case brought suit against the owners of the land, asking for an account of sales, and for conveyance of an undivided half of the lots unsold. The court refused to enforce the contract and
“A court of equity will not enforce a contract resting upon such official delinquency, or even tending to produce it. Such is the character of the contract before us. If we enforce it, we lend the sanction of the court to a class of contracts the inevitable tendency of which is to make the officers of these powerful corporations pervert their trusts to their private gain at the price of injury at once to the stockholders and to the public. Rendered into plain English, the contract in this case was a bribe on the part of Wathen and Gibson to the president and other officers of the railway company, and to the contractors who were building the road, of an undivided half of one hundred and sixty acres of land, in consideration of which the road was to be constructed on a certain line and a depot built at a certain point. ... In this particular case no wrong may have been done, and yet public policy plainly forbids the sanction of such contracts because of the great temptation they would offer to official faithlessness and corruption.”
The principle adopted in the above case is sustained by the following authorities: Fuller v. Dame, 18 Pick. 472; Holladay v. Patterson, 5 Ore. 177; Bliss v. Matteson, 52 Barb. 335; Berryman v. Trustees of Cincinnati Southern Railway, 77 Ky. 755; West v. Camden, 135 U. S. 507 (10 Sup. Ct. 838) ; Woodstock Iron Co. v. Richmond & D. Extension Co., 129 U. S. 643 (9 Sup. Ct. 402). In the last-named case the court said:
“The business of the extension company was one in which the public was interested. Railroads are for many purposes public highways. They are constructed for the convenience of the public in the transportation of persons and property. In their construction without unneces*54 sary length between designated points, in their having proper accommodations, and in their charges for transportation, the public is directly interested. Corporations, it is true, formed for their construction, are private corporations, but whilst their directors • are required to look to the interests of their stockholders, they must do so in subordination to and in connection with the public interests, which they are equally bound to respect and subserve. All arrangements, therefore, by which directors or stockholders or other persons may acquire gain, by inducing those corporations to disregard their duties to the public, are illegal and lead to unfair dealing, and thus being against public policy will not be enforced by the courts.”
It will be noted that the language of the above opinion not only applies the rule to directors or stockholders and declares that all arrangements by which they may acquire gain by inducing these corporations to disregard their duties to the public are illegal, but also applies the same rule to “other persons;” the words being particularly applicable to the claim made in this case that Johnson, not being, an officer of the railway company, is .entitled to have his contract enforced. Further addressing ourselves to the last-named point, we refer to the case of Embrey v. Jemison, 131 U. S. 336 (9 Sup. Ct. 776). The contract involved in that case was a wagering contract, and it was held that the^broker who negotiated between the parties for the purpose of entering into the illegal agreement was particeps criminis, and could not recover for services rendered or losses incurred by himself on behalf of either in forwarding the transaction. In the case of Armstrong v. Toler, 11 Wheat. 258, the following instruction was given to the jury below:
“That where the contract grows immediately out of, and is connected with, an illegal or immoral act, a court of justice will not lend its aid to enforce it. And if the*55 contract be, in fact, only connected with, the illegal transaction, and growing immediately out of it, though it be in fact a new contract, it is equally tainted by it.”
The instruction was sustained by the supreme court of the United States in an opinion rendered by Mr. Chief Justice Marshall. The learned jurist says the law was correctly -stated by the trial court. To the same effect are the following cases: Barton v. Port Jackson, etc., Plank Road Co., 17 Barb. 397; Deans v. McLendon, 30 Miss. 343; Howell v. Fountain, 3 Ga. 176 (46 Am. Dec. 415); Branch v. Haas, 16 Fed. 53; Gunter v. Leckey, 30 Ala. 591; Buck v. Albee, 26 Vt. 184 (62 Am. Dec. 564); Bartle v. Coleman, 4 Pet. 184; 15 Am. & Eng. Enc. Law (2d ed.), 992.
It cannot be successfully urged that appellants have waived objection to the illegality of this contract by not specially pleading the same. . The nonenforcement of illegal contracts is a matter of common public interest, and a party to such contract cannot waive his right to set up the defense of illegality in an action thereon by the other party. It is not necessary to specially plead the defense of illegality, but, when the same is made to appear to the court at any stage of the case, it becomes the duty of the court to refuse to entertain the action. The above statements of the law are sustained by the following cases: Oscanyon v. Arms Co., 103 U. S. 261; Coppell v. Hall, 7 Wall. 542; Cardoze v. Swift, 113 Mass. 250; Wilde v. Wilde, 37 Neb. 891 (56 N. W. 724) ; Sheldon v. Pruessner, 52 Kan. 579 (35 Pac. 201, 22 L. R. A. 709); Craig v. Missouri, 4 Pet. 410 ; Johnson v. Hulings, 103 Pa. St. 498 (49 Am. Rep. 131); Wight v. Rindskopf, 43 Wis. 344; Kreamer v. Earl, 91 Cal. 112 (27 Pac. 735) ; Morrill v. Nightingale, 93 Cal. 452 (28 Pac. 1068, 27 Am. St. Rep.
“The law leaves the parties to such a contract where it found them. If either has sustained a loss by the bad faith of a particeps criminis, it is but a just infliction for premeditated and deeply-practiced fraud; which, when detected, deprives him of anticipated profits, or subjects him to unexpected losses. He must not expect that a judicial tribunal will degrade itself by an exertion of its powers, by shifting the loss from one to the other, or to equalize the benefits or burdens which may have resulted by the violation of every principle of morals and of laws.”
The trial court found that neither party was entitled to recover anything upon an accounting, which was fight. But in the light of the foregoing authorities, that portion of the court’s findings and judgment which awarded and decreed specific performance in favor of respondents must be set aside. To that extent the judgment is reversed, and the cause remanded, with instructions to the lower court to modify the judgment to the extent of decreeing that the
Reavis, C. J., and Fullerton, Dunbar, Anders, and Mount, JJ., concur. .