Washington Irr. Co. v. Krutz

HAWLEY, District Judge, after making the foregoing statement of facts, delivered the opinion of the court. There are 12 errors assigned on this appeal, which embody, in various forms, the following propositions, viz.: That the services performed by Krutz for Schulze, for which he was to receive 160 acres of land, were rendered to the Northern Pacific Railroad Company, and not to the Yakima & Kittitas Irrigation Company, or its successor in interest; that Paul Schulze had no power to bind the irrigation company to convey to Krutz and wife, petitioners herein, a water right for 320 acres of land; that the receivers of the property of the Yakima Investment Company were without power to adopt or ratify the agreement upon which petitioners rely; that petitioners are in a court of equity with unclean hands, praying specific performr anee where there is á partial failure of consideration; that the petitioners can be fully compensated in damages; that the evidence failed to show the terms and conditions of the agreement entered into by Paul Schulze for the irrigation company and the petitioner Ira M. Krutz. The third assignment reads as follows: “Because the evidence showed that the services rendered by the petitioner Ira M. Krutz, for which he claims 160 acres of land and a water right for 160. acres of land, were services rendered by him while register of the United States land office at North Yakima, Washington, and that said services were a part of his official duties, and that the promise made to compensate him therefor was contrary to public policy and void, and the alleged agreement for a conveyance of a water right for 320 acres of land grew immediately out of said illegal claim, and is contrary to law and invalid.” Appellees herein allege in their petition that they were the owners of the S. yi of section 10, township 10 N., range 21 E., containing 320 acres, and then allege the facts of the Yakima Improvement — 284 — Company’s contract with the railroad company for large quantities of land, and aver— “That doubts having arisen as to the title of said railroad company to said lands under said grant, and the steps that had been taken in pursuance thereto, this petitioner, Ira M.' Krutz, at various times assisted in clearing up these clouds upon such titles and in preventing contests, and his assistance in that respect was of great benefit to said irrigation company, and enabled them to obtain a clear title to said lands; that thereafter said Yakima Improvement Company entered into an agreement with these petitioners whereby it contracted to convey to petitioners a good, sufficient, and perpetual water right from its irrigation canal, commonly known as the ‘Sunny-side Canal,’ for the lands of petitioners hereinabove described, if and whenever petitioners should convey or cause to be conveyed to said company a good title to one hundred and sixty acres of other lands lying under said canal or its laterals, which proposal was accepted by petitioners; that thereafter, said Yakima Improvement Company having become insolvent, under proceedings duly had in this honorable court in the above-entitled cause, J. S. Allen, Geo. Donald, and Paul Schulze were appointed receivers of the property and assets of said company, with authority to operate said property under the directions of this honorable court; that said receivers were fully advised of the terms of said agreement with petitioners, and approved and adopted the same; that afterward, on or about 12th day of May, 1896, these petitioners, in part performance of said contract and agreement, conveyed to said J. S. Allen and Geo. Donald, as such receivers, and for their said trust (the said Schulze having died prior thereto), the north half of the northwest quarter of section 12, township ten north, of range 21 east; that said conveyance was accepted by said receivers for their said trust; that thereupon said receivers prepared and signed a conveyance conveying to these petitioners a water right for their said lands, and filed said conveyance with the papers pertaining to said receivership, to be delivered to these petitioners upon the conveyance to said trust of'the additional eighty acres specified-in said agreement * * *; that they [petitioners) have fully complied with their said agreemént; that said Washington Irrigation Company has received the full benefit thereof; and that petitioners are entitled to a specific performance upon the part of said company.” The answer of appellant denies the various allegations in the petition, and, among other things, avers as an affirmative defense that-r- “Believing that the only services which the petitioner Ira M. Krutz had rendered the Yakima Investment Company or its predecessor were rendered by said Krutz while register of the local land office at North Yakima, Washington, and that his claim for compensation therefor was contrary to public policy and void, investigated his said claim, and reached the conclusion that all services performed by said Krutz, and being the services set forth in his said petition, were performed by him while register of said land office, and the same pertained to his duties as such register, and that said Krutz used his official position wrongfully and for private gain, and that the promise and agreement for a water right for 160 acres of land, if any, was founded upon, and immediately grew out of, his wrongful acts as register.” Upon these issues the cause was tried, and decree rendered in favor of petitioners. The record is presented without any bill of exceptions. There is no agreed statement of facts. There is what purports to be a statement of the testimony of witnesses, and of divers documents, exhibits, and letters.' But it is not shown that any objections were made or exceptions taken to any part or portion thereof. There is not a single exception to any ruling of the court. Whatever was: offered was taken down without any ruling of the court. Everything was admitted without objection. We cannot, therefore, be expected tó discuss all the questions argued by counsel. — 285 — Were the transactions between the parties which led up to the contract herein sought to be enforced of such a character as to authorize this court to say, as a matter of law, that the contract js void as against public policy, or is the evidence sufficient to make it the duty of this court to declare that the contract, as proven, is valid ? It is contended on behalf of appellees that, inasmuch as all the testimony was taken before the court, the decision of the lower court upon the facts is not subject to review. But in reply to this contention it is only necessary to say that the facts as to all of the transactions between the parties, upon the point mentioned, is undisputed. There is no conflict in the evidence upon any material point. The main question presented is a legal one, to be determined upon the undisputed facts. It must be admitted that, if Krutz had accepted the offer of Schulze while he was in office, the bribery of the one and corruption of the other could not be questioned. Such a contract would be contra bonos mores, and could not be enforced in a court of justice. But Krutz did not accept the offer. He refused it, accompanying the refusal with the statement that he could not accept it while he was in office, but that his term of office would soon expire, and if the railroad company would then give him something to do, so that he could feel that he had earned the 160 acres of land, he would then accept the offer. The services rendered by petitioner to the railroad company at the request of Schulze after he went out of office were, in our opinion, purely nominal, and were so blended with the original offer made by Schulze, and conditional acceptance by Krutz, as to make it but one transaction; and if the case rested alone on such services, in connection with the manner of the original offer, it would unquestionably be the duty of a court.of equity to put its seal of condemnation on the whole transaction, and dismiss a bill brought to enforce such a contract. As register of the land office, Krutz was, as he states in his testimony, frequently called upon to give advice to people as to the manner of selecting and locating public lands, etc. It was his duty to inform such parties of the methods and procedure to be pursued in such matters, but he had no right to go outside of his legitimate duties in this respect, and become the partisan adviser of one applicant, and point out to him a course- to be pursued whereby he could obtain a preference over others, to their prejudice and- detriment. The action of a public officer should always be guided and controlled only by considerations of the public welfare, and a desire faithfully, honestly, and impartially to perform his official duties; and any action taken by him outside of his official duties, which tends to substitute for those considerations others, which are based upon illegal grounds, is clearly opposed to public policy and void. This principle is too well settled to require the citation of any authorities. It is unnecessary to criticise the action of Mr. Krutz in regard to his conditional acceptance of the offer. He may have been actuated by good motives, without any intent to do wrong; and he may have thought that by the services he subsequently rendered he- had justly earned the fee which entitled him to then accept a deed, as previously — 286 — offered by Schulze. But it is impossible to separate the services from the original offer, so as to make the last valid if the first was void. The services rendered by Krutz after he went out of office are so blended with the original promise and conditional acceptance as to make the whole a unit and indivisible. That which is bad destroys that which is good, and they perish together. It is the duty of courts to carefully scrutinize contracts of this general character, and to condemn the very appearance of evil, as the tendency of such contracts is to lead to the encouragement of wrongdoing. Hence the relief asked for in such cases should not be granted. This result follows “without reference to the question whether improper means are contemplated or used in their execution. The law looks to the general tendency of such agreements, and it closes the door to temptation by refusing them recognition in any of the courts of the country.” Tool Co. v. Norris, 2 Wall. 45, 56, 17 L. Ed. 868; Trist v. Child, 21 Wall. 441, 452, 22 L. Ed. 623; Meguire v. Corwine, 101 U. S. 108, 111, 25 L. Ed. 899; Oscanyan v. Arms Co., 103 U. S. 261, 275, 26 L. Ed. 539. The argument of appellant’s counsel is principally based upon the grounds we have discussed, and we have therefore deemed it proper to express our views in regard thereto. If the appellees were seeking any relief against the railroad company, based alone upon the promise of Schulze, as its agent, to convey 160 acres of land to Krutz in consideration of the services he had rendered to the railroad company, we would have no hesitation whatever in declaring that the contract between them could not be enforced in a court of equity. But the contract set forth in the petition was not made with the railroad company. It is not a party to these proceedings. The petitioners ask no relief against it. It is true that Paul Schulze advised, directed, and controlled the whole business. He was the guiding spirit in all of the' transactions. But the contract herein sought to be enforced is a new contract, different in its nature; terms, and conditions from the contract which the railroad company made with Krutz, and it is based upon other considerations, and made long after Krutz went out of office. This contract calls for a water right for 320 acres of land, to secure which Krutz was required to convey to the water company 160 acres of land, which he did at the times and in the manner stated in the statement of facts. The record shows that the deeds to 160 acres of land were accepted by the water-company, and that it sold a greater portion thereof, and appropriated the proceeds to its own use. Eor this reason it is not in a position to claim that Schulze, as president of the water company, or as receiver thereof, had no- authority to make the contract. The corporation could not accept the conveyance for the land upon which the consideration of the contract was based, and then deny the authority of its president to enter into the contract. The record also shows that Mr. Gránger, the general superintendent of appellant, knew that the lands conveyed by Krutz, as above stated, were in performance of his contract for a water right for his 320 acres of land. It also shows that Allen and Donald, the receivers, received the conveyance from Krutz of 80 acres of land with the knowledge that it was delivered in pursuance of the contract in question. It is — 287 — further shown that they prepared a deed conveying the water right for 320 acres to Krutz, but for some unexplained reason it was not delivered. Subsequently they notified Krutz that he would have to apply to the court for relief. Can it, in the light of these facts, be legally said that this new contract grew immediately out of the illegal c6ntract made by Krutz with the railroad company? We think not. It is true that it was made with full knowledge of the prior agreement, and that it had a remote relation thereto, in this: that the occasion for making the new contract arose out of the existence of the prior illegal act. But this fact alone does not make it void. In Armstrong v. Toler, 11 Wheat. 258, 269, 6 L. Ed. 468, where the principles we have announced as to the invalidity of the prior agreement are clearly recognized, Marshall, C. J., speaking for the court, said, “A new contract, founded on a new consideration, although in relation to property respecting which there had been unlawful transactions between the parties, is not itself unlawful.” He points out the various distinctions that should always be drawn' with reference to the different kinds of contracts, and cites several authorities to show that on a new contract, by which money is advanced at the request of another, or there is an express promise to pay, an action may be sustained, although the money was advanced to satisfy an illegal claim'. This distinction is founded on the ground that the money lent would constitute a new consideration, and be the foundation of a new contract, which could not be vitiated by a knowledge of the purpose for which the money was lent. We are of opinion that the principles announced in that case, and followed in many others of like import, are applicable to the facts in the present case. Moreover, whatever view might be taken of the relation which the illegal contract bears to the new contract, the appellant ought not to be permitted to refuse to perform this contract without first returning to Krutz the lands, or the full value thereof,—the fruits and advantages it had received. Its offer to pay him $400 for the 80 acres of land it had received from Kreider at Krutz’s request is not such an offer as the law requires. It would be an act not only of hardship, but of apparent injustice, to deny specific performance herein, under all the circumstances, and compel Krutz to bring a suit against appellant for damages for its failure to return the property. Ordinarily the law leaves to parties the right to make such contracts as they please, demanding, however, that they shall not require either party to do an illegal thing, and that they shall not be against public policy or in restraint of trade. Manufacturing Co. v. Gormully, 144 U. S. 224, 233, 12 Sup. Ct. 632, 36 L. Ed. 414. But specific performance is not a matter of absolute right. It rests entirely within judicial discretion, to be exercised according to the settled principles of equity, so as to reach the ends of justice and of right. Snow v. Nelson (C. C.) 113 Fed. 353, 356; Newton v. Wooley (C. C.) 105 Fed. 541, 544; 20 Enc. Pl. & Prac. 392, and authorities there cited. No positive rule can be laid down by which the action of the court can be determined in all cases. In general it may be said, as was stated in Willard v. Tayloe, 8 Wall. 557, 567, 19 L. Ed. 501, “that the specific relief will be granted when it is apparent, from a view of all the circumstances of the particular case, that it will subserve the ends of jus — 288 — tice, and that it will be withheld when, from a like view, it appears that it will produce hardship or injustice to either of the parties. It is not sufficient, as shown by the cases cited, to call forth the equitable interposition of the court, that the legal obligation under the contract to do the specific thing desired may be perfect. It must also appear that the specific enforcement will work no hardship or injustice.” See, also, Nickerson v. Nickerson, 127 U. S. 668, 675, 8 Sup. Ct. 1355, 32 L. Ed. 314; Hennessy v. Woolworth, 128 U. S. 438, 442, 9 Sup. Ct. 109, 32 L. Ed. 500; Dent v. Ferguson, 132 U. S. 50, 67, 10 Sup. Ct. 13, 33 L. Ed. 242. Without further discussion, our conclusion upon the whole case is that the new agreement made by Schulze, as president of the water company, with Krutz, for the conveyance of the water right for 320 acres of land, is, under all the facts considered herein, a valid one, and that the ends of justice would be subserved by its enforcement. The decree of the circuit court is affirmed, with costs.