People's Savings Bank v. Big Rock Stone & Construction Co.

Riddick, J., (after stating the facts.) The only question in this case is whether it is against public policy to permit a bank of which the mayor of a city is a stockholder and president to take an assignment of the claim of a contractor against the city for the price of work which he has performed for the city, and which work must be inspected and accepted for the city by a board of which the mayor is chairman? The bank, acting through its president and other officers, in good faith advanced the contractor certain sums of money to enable him to carry out his contract with the city, and to secure the loan took from him an assignment of his claim against the city. At the time this was done the work had not been completed, and therefore had not been inspected or accepted by the city. It would ■ certainly be against public policy to permit the majmr of a city to take an assignment of such a claim to himself and to become personally interested in this way in a contract against the city of which he was the chief officer and a member of a board whose duty it was to inspect the work and pass upon the question as to whether it had been performed in accordance with the contract. In such a case the law will not permit him to put himself in a position where his own interests may conflict with those of the city which it is his duty to guard and protect. But the same rule which prevents him from doing that as an individual will prevent him from doing so as the president of a corporation in which he is also a stockholder. His interests as a stockholder and president of the corporation might conflict with the interests of the city of which he is mayor and chairman of the board of public affairs charged with the duty of inspecting the work in question. If a question should arise before the board of public affairs as to whether or not the contractor had properly performed his work and was entitled to be paid the contract price, the "duty of the mayor, as an officer representing the city, might require the rejection of the work, which would be opposed to his interests as president and stockholder in the bank. The law aims to shield officers against such temptations by forbidding them from entering into contracts which might bring their private interests into antagonism with those of the city and by declaring that all such contracts are void. West v. Camden, 135 U. S. 507; Holcomb v. Weaver, 136 Mass. 265; Edwards v. Randle, 63 Ark. 320; 9 Cyc. 481; 15 Am. & Eng. Enc. Law (2 Ed.), 934-976. There is nothing in our statute that changes this rule of law. On the contrary, it goes further, and forbids the board of public affairs to make any contract with any person associated in business with or related within the sixth degree of consanguinity or affinity under the civil law to any member of the board or member of the city council except upon advertisement and to the lowest bidder. It provides that “every contract in which any such forbidden person shall have.an interest, direct or indirect, shall be utterly null and void.” And requires that an affidavit be filed before payment showing that no person forbidden by the act has an interest in the contract. Kirby’s Digest, § § 5644, 5647- There is nothing in this language to justify a member of the board in becoming interested in a contract, even after it has been made to the lowest bidder, when his duty requires that he shall inspect and determine whether the work due under the contract shall be accepted by the city or not. In this case the original contract with Torbert was valid, for no member of the board or council was interested therein, but the subsequent contract by which Torbert, before his work had been completed and accepted, assigned his claim against the city under the contract to the bank of which the mayor was president and stockholder came within the rule that contracts which place the individual interests of public officers -in conflict with their duty to the public and put them under an inducement tp act in violation of such duty are ' illegal. By this assignment the mayor, as president and stockholder of the bank, became interested in a contract, the work done under which he, as member of the board of public affairs, had to approve and accept for the city. The statute declares that all such contracts “shall be utterly null and void,” and this is only a restatement of the rule of the common law. Such contracts being illegal, no court can enforce them, for to do so would be for “the law to aid in its own undoing.” Berka v. Woodward, 125 Cal. 119, 45 L. R. A. 420; Melliss v. Shirley Local Board, 16 Q. B. Div. 446; Brown v. Tarkington, 3 Wall. (U. S.), 377; Oscanyan v. Winchester Arms Co., 103 U. S. 261; 15 Am. & Eng. Enc. Law (2 Ed.), 971. While we are well satisfied that in this particular instance both the mayor and the bank officials acted in entire good faith, and really intended what they did for the benefit of'the city and its contractor, yet the law looks not alone at this particular instance, but to what a rule that recognized the validity of such contracts would lead. And, while these men acted from honest motives, yet, when they contracted for the assignment of this claim against the city, they entered into a contract which the law as a matter of public policy will not enforce. The judgment of the chancellor was therefore in our opinion right, and his decree is affirmed. McCulloch, J., dissenting.