Hegness v. Chilberg

224 F. 28, 139 C.C.A. 492, 4 Alaska Fed. 318, 1915 U.S. App. LEXIS 1840

• Court: Court of Appeals for the Ninth Circuit
• Decided: May 10, 1915
• Docket: No. 2523
• Status: Published

Opinions

GILBERT, Circuit Judge

(after stating the facts as above).

The defendant contends that the contract of partnership which is sued upon is against public policy and void, for the-reason that it tends to prevent or diminish competition. The defendant relies upon the decision of this court in Hoffman v. McMullen, 83 F. 372, 28 C.C.A. 178, 45 L.R.A. 410, affirmed by the Supreme Court in 174 U.S. 639, 19 S.Ct. 839, 43 L.Ed. 1117, and Atcheson v. Mallon, 43 N.Y. 147, 3 Am.Rep. 678. In Hoffman v. McMullen this court held that a contract to prevent competition and bidding for public works is contrary to public policy and cannot be enforced. The court said: “The rule is universal that agreements which, in their necessary operation upon the action of the parties, tend to restrain their natural rivalry and competition, and thus to result in the disadvantage of the public or third parties, are against the principle of sound public policy, and are void.”

And the Supreme Court said: “It might readily be surmised that, if these parties had bid in competition, one or both of the bids would have been lower than their combined bid.”

■ The law as applied to contracts to carry the mails is expressed in section 3950, Rev.Stats. (39 U.S.C.A. § 432), which provides: “No contract for carrying the.mail shall be made with any person who has entered, or proposed to enter, into any combination to prevent the making of any bid for carrying the mail, or who has made any agreement, or given or performed, or promised to give or perform, any consideration whatever to induce any other person not to bid for any such contract.”

1. The statute and the decisions in Hoffman v. McMullen and Atcheson v. Mallon would be applicable and controlling here, if there were any evidence in the case tending to show that the contract between the plaintiff and the defendant had a tendency to prevent competition in bidding. But there is no evidence, either in the contract or' elsewhere in the record, that the plaintiff ever at any time contemplated bidding for the mail contract, or would have made a bid, or ever thought of making a bid, on his own behalf. Nor is there any fact or circumstance from which such a purpose on his part might be inferred. If any inference is to be drawn from the evidence and from the circumstances, it is that the plaintiff would not have applied for the contract for himself alone. He was a banker, a man of means, and it is not to be supposed that he would think of undertaking to contract to carry mail between Nome and -Unalakleet through the winter months. In Hoffman v. McMullen this court said: “There is no valid objection to such voluntary combinations, if the joint action of the parties is done honestly and in good faith. In all contracts secured in such a manner, the courts should never hesitate to protect parties in their agreements with each other, and compel them to comply with the terms thereof. It is only where the facts and circumstances surrounding the case clearly show that illegal means or improper and deceptive influences and methods were used to procure the contract that the maxim ‘in pari delicto’ applies.”

In 9 Cyc. 492, it is said: “On familiar principles, an agreement that one should bid for several for a public contract is not illegal per se.”

In Bellows v. Russell, 20 N.H. 427, 51 Am.Dec. 238, it was held that an agreement that one shall bid for several for a mail contract is not void, unless made for some illegal purpose affecting public policy. We agree with the .conclusion of the court below, which is thus stated in the opinion: “The contract here shows on its face nothing more or less than an agreement that the parties shall endeavor to obtain a contract for carrying the mail in Alaska, and that they shall divide the net profits upon an agreed percentage basis, after the objects of the contract are completed, ■ and after the money due on same is paid by the United States. There is no suggestion of a purpose to lessen the bids, nor is that the effect or tendency of the contract.”

2. Nor is there anything in the case to show that the contract contemplated that the plaintiff would, or that he ever did, employ funds in any improper way, or exert influence in any improper manner to obtain the contract. It is not seen how it was possible to use money or exert influence for that purpose. The contract was necessarily and according to law let to the lowest bidder. The case differs totally from Tool Co. v. Norris, 2 Wall. 45, 17 L.Ed. 868, cited by the defendant. That was a case in which the contract was not let to the highest bidder, but was obtained by personal solicitation. The Civil War having just begun, the government was in need of arms. The Tool Company was a manufacturer of arms. Norris set to work to concentrate influence upon the War Department. He got senators to go with him to the War Office. By one means and another he got influential introduction to the Secretary of War, and secured the contract. There was nothing of that kind in the present case. The agreement provided that each party should endeavor to obtain the mail contract, and to that end the plaintiff agreed to advance all necessary funds and to obtain the bond; and although he alleged in his complaint that the contract was secured through his efforts, and without any aid or assistance from the defendant, and that he obtained and furnished the bond required by the government of the United States, and advanced the necessary money and made such financial arrangements that he and the defendant were able to and did comply with the terms and conditions of the said contract, it nevertheless does 'not appear, and it is not shown,. that the agreement contemplated, as preliminary to engaging in the mail carriage contract, that the plaintiff should expend any sum of money, except such as might be necessary to obtain the bond. The evidence shows that he did this at a cost of $1,200.

3. Nor is there anything in the case to show that the plaintiff is not entitled to recover for the reason that his connection with the mail contract was concealed. There is no evidence that it was agreed that it should be concealed. The contract does not so provide, nor is there anything in the record to indicate that such was the intention. On the other hand, the agreement was openly signed in the presence of two witnesses, and one of the affidavits states that the post office officials were aware of the plaintiff’s connection with the mail'contract. There was nothing fraudulent in the mere fact that the agreement contemplated that the mail contract should be taken in the name of the defendant. A considerable sum of money was needed to finance the mail contract, and this the plaintiff agreed to furnish, while the defendant agreed to do the work. The fact that the plaintiff was to receive 85 per cent, óf the net profits, and the defendant 15 per cent, is not ground for setting aside the orders appealed from. As a matter of fact, so far as the facts are shown, the stipulated division of the profits does not seem to have been inequitable. A large portion of the gross profits was received by the defendant in the way of wages, thereby reducing the sum of the net profits to be divided. The contract was to carry the mails only during the winter months, from November to May, inclusive. The first year the defendant received $3,600 as his wages; the second year, $3,600; and the third year $3,675; and at the end of that year it is said that he appropriated the additional sum of $1,800, claiming it as extra compensation. The sums advanced by the plaintiff to carry out the contract during those years ranged from $10,833 to $14,000 each year.

4. There is no evidence that either the plaintiff or the defendant violated any of the regulations of the Post Office Department. Counsel for the defendant refers to the new postal laws and regulations of 1913, issued under the act of Congress approved August 24, 1912 (37' Stat. 539, c. 389), in which, in section 1414, it is provided that proposals for carrying the mails shall be made on forms prescribed by the Postmaster General, and he states in his brief that the forms prescribed under that authority contain the following, to which the bidder must certify: “This proposal is made in my own interest, and not by me as the agent of any other person or company, with full knowledge of the distance of the route, the weight of the mail to be carried, and all other particulars with reference to the route and service, and also upon careful examination of the instructions attached to said advertisement.”

And he argues that the defendant must have signed such a certificate, and that therefore the contract he made with the plaintiff was in violation of the postal rules and regulations. To this there are two answers :

First. It nowhere appears in the record that the defendant signed such a certificate. What were the rules and regulations in force in 1909 is not shown. Nor do the postal laws and regulations of 1913 contain any specification of such a form to be signed by bidders. All that the volume contains on that subject is the statute of the United States (18 Stat. 235 [39 U.S.C.A. § 426]), which provides that no proposal shall be considered unless — “there shall have been affixed to said proposal the oath of the bidder, taken before an officer qualified to administer oaths, that he has the ability, pecuniarily, to fulfill his obligations, and that the bid is made in good faith, and with the intention to enter into contract and perform the service in case his bid is accepted.”

If anything in the proposal which the defendant signed stands in the way of the plaintiff's right to recover in this suit, it has not yet been shown in the record, and for that reason, if there is anything in the proposal that affects the controversy, its consideration should await the final hearing on the merits.

Second. But, even if it should be shown that the defendant signed the certificate which the defendant quotes, there is nothing in the facts to impeach its verity; for it was true that the proposal was made by the defendant in his own interest, and not by him as the agent of any other person or company.

5. The contract between the parties is not void by virtue of section 3963 of the Revised Statutes (39 U.S.C.A. § 444), which provides that: “No contractor for transporting the mails within or between the United States and any foreign country shall assign or transfer his contract, and all such assignments or transfers shall be null and void.”

There is in this case no assignment or transfer of the mail contract. It remained at all times in the name of the original bidder, and for the benefit of the partnership. The statute prohibits only the transfer of a mail contract that has been made and entered into.

6. Nor is the contract made void by section 3737 (41 U.S.C.A. § 15) which prohibits the transfer of any government contract or order or any interest therein “by the party to whom such contract or order is given, to any other party,” and provides that: “Any such transfer shall cause the annulment of the contract or order transferred so far as the United States are concerned.”

That statute is for the protection of the United States only, and does not affect the rights of the parties to such a transfer. Dulaney v. Scudder, 94 F. 6, 36 C.C.A. 52; Goodman v. Niblack, 102 U.S. 560, 26 L.Ed. 229.

7. Nor is the reversal of the order of the court below required by the provisions of section 3477 (31 U.S. C. § 203 and note) which prohibits the transfer or assignment of any claim upon the United States, unless the assignment is executed' and attested in the manner prescribed in the section, and after the allowance of the claim and the issuance of the warrant. It is contended that this statute is violated by two provisions of the partnership contract : First, in that it provides that all warrants issued and delivered by the government in payment under the mail contract shall be signed by the defendant and delivered to the plaintiff; second, in that the' agreement makes the plaintiff the owner of a large interest in the mail contract.

In answer to the first proposition, it is sufficient to say, so far as the case here on appeal is concerned, that if it be conceded that the provision in the agreement for the indorsement of the warrants from the defendant to the plaintiff is void, it does not make void the entire contract. It it still a valid partnership agreement, calling for division of profits in the proportions therein specified, and the case comes within the principle announced in Nutt v. Knut, 200 U.S. 12, 26 S.Ct. 216, 50 L.Ed. 348, in which the court gave effect to a similar agreement, and said: “Such an agreement did not give the attorney any interest or share in the claim itself, nor any interest in the particular money paid over to the claimant by the government. It only established an agreed basis for any settlement that might be made, after the allowance and payment of the claim, as to the attorney’s compensation. It simply created a legal obligation upon the part of the estate, which, if not recognized after the collection of the money, could have been enforced by suit for the benefit of the attorney, without doing violence to the statute or to the public policy established by its provisions.”

Such being the equitable right of the plaintiff, the court below did not abuse discretion in enjoining, pendente lite, the defendant from secreting or disposing of the postal warrants, or sending the same without the jurisdiction of the court. In National Bank of Commerce v. Downie, 161 F. 839, 843, 88 C.C.A. 657, 661, this court said: “Hence, where a claim has been allowed by the accounting officers of the United States, a warrant issued therefor and delivered to the claimant, the government is no longer concerned with his disposition of the draft, or the funds which it represented”—citing York v. Conde, 147 N.Y. 486, 42 N.E. 193, and Farmers’ National Bank v. Robinson, 59 Kan. 777, 53 P. 762.

Second. The provision of the agreement by which the plaintiff is given an interest in the profits of the mail contract is not an assignment of a claim against the United States. Hobbs v. McLean, 117 U.S. 567, 6 S.Ct. 870, 29 L.Ed. 940, is decisive of that question. In that case, in considering the effect of section 3477, the court said: “When the contract of partnership was made, Peck had no claim which he could present for payment, or on. which he could have brought suit. He therefore had no claim the assignment of which the statute forbids. It is so clear that the articles of partnership do not constitute such an assignment as is forbidden by the section under consideration that it would be a waste of words further to discuss the point.”

The orders are affirmed.