Forbes v. McDonald

54 Cal. 98

• Court: California Supreme Court
• Decided: July 1, 1880
• Docket: No. 5,531
• Status: Published

Opinions

Department No. 2, Myrick, J.:

Peter Owens was indebted to A. Forbes by reason of transactions in the stock of the Mahogany Gold and Silver Mining Company, in the sum oí $2,102.50, for which Forbes held 150 shares of the stock as collateral, then worth about $4,200. Forbes was a trustee of the company. The management of the company was not harmonious, two trustees having views opposed to the other two, Forbes being the fifth. The defendants, McDonald and T. J. Owens, Who were dealing in stock of the corporation, desired to have Forbes resign as trustee, that they might have some friend put in his place; and Forbes wanted payment of his indebtedness from Peter Owens secured. So, it was agreed that the defendants, McDonald and T. J. Owens, should give their promissory note for the amount of Peter Owens’ indebtedness, payable at six months, interest at li per cent, per month, and Forbes should resign and aid them in electing a successor. The note was made payable to the plaintiffs, in which firm A. Forbes was a partner.

The note not having been paid, the plaintiffs brought suit; the defense of want of and illegality of consideration was interposed, and the case was heard by a jury. The Court below instructed the jury, in substance, among other things, that, if any part of the consideration for the giving of the note was the resignation by Forbes of his office as trustee of the corporation, that the consideration was illegal, and the whole note was void, and plaintiffs could not recover: Notwithstanding this instruction, the jury rendered a verdict for the plaintiffs for the full amount of the note and interest. On motion of the defendants the Court below granted a new trial, and from this order this appeal is prosecuted.

It is not necessary to cite authorities to show that a contract is void if a portion only of the consideration is illegal. It does not appear to us to he at all doubtful, that if the whole or a part of a consideration be that a trustee resign his trust, the consideration is illegal. It is contra bonos- mores. Trustees of corporations owe duties to others besides themselves; they have been placed in a position of trust by the stockholders, and to those stockholders they must be faithful. It is a violation of that trust for them to be bought out of office. They may resign when they please, but they must not make profit or benefit to themselves in-the matter of such resignation.

The instructions of the Court below were correct; the verdict of the jury was contrary to the instructions, and the Court did not err in granting a new trial.

The order granting a new trial is' affirmed.

Thornton, P. J., concurred.