Lainhart v. Burr

49 Fla. 315

Opinion

Carter, J.

(After stating the facts.)

The jurisdiction of a court of equity to entertain a bill for injunction and accounting such as was filed in this case is not questioned. Neither is a question presented as to the sufficiency of the allegations of the bill to obtain the relief prayed. One of the principal questions involved and argued is, whether county commissioners may through employes selected by them purchase from mem»bers of their body or from firms in which such members are partners, supplies to> be used for county purposes, audit and approve the accounts and pay for same by warrants drawn on coitaty funds. The law does not permit a trustee or an agent to make contracts with himself regarding the property committed to llis charge, and this on grounds of public policy. Neither does it permit him to so conduct himself with respect to his trust, as to create a contract by implication with himself. The temptation to abuse his trust and to benefit himself to the detriment of the trust property is too great to permit him to thus deal with it. In such dealings he can not act impartially, for self interest will prompt a one-sided view, inclining him to adopt that course which will benefit him individually. To permit him to buy from himself, puts him in the attitude of being a judge in his own cause, and of attempting to serve two masters whose interests are diametrically opposed. The law does not denounce such conduct on the theory that fraud or wrong inevitably results, but because it may and probably will result, hence proof that no wrong was intended or committed and that no fraud resulted in a particular case does not render the contract valid. The lafw frowns upon and denounces such conduct in every case, and the principal or cestui que trust is given a remedy by which all such transactions shall be set aside if he so desires. The same principle applies to officers of private corporations as well as to public' officers. If a public officer having power to purchase supplies, contracts with himself to supply them, the contract is void, no action can be maintained for the contract price, and even though the amount specified in such contract were audited and a warrant drawn to pay it, a court of equity will enjoin such payment at the suit of taxpay- , ers. With respect to county commissioners the principle has peculiar application. While the range of their powers is limited they are necessarily invented with large discretion to be exercised in the execution of such powers as are conferred upon them, and a sound public policy requires that none of the principles with which the law safeguards the conduct of agents and trustees, should be relaxed in respect to this class of public officers. It is, therefore, highly improper that the commissioners or purchasing agents employed by them should purchase supplies from members of the board or from firms in which they are partners, especially where the commissioners themselves audit the bills. Some of the transactions shown in the present case grossly violate this rule of public'policy and justly deserve severe condemnation at the hands of the law. The county commissioners appointed as supervisor of convicts a man who was a partner in business with one of their number. This supervisor had authority to purchase supplies, and purchased, them of the firm composed of himself and a commissioner, whose duty it was to audit and approve the accounts for same. This was highly improper and can not be tolerated under any rule of public policy. The public is entitled to the unbiased judgment and discretion of the commissioners and of the supervisor as to the necessity for and the quantity and quality of supplies proposed to be purchased, but if the supervisor may buy from a firm composed of himself and a-commissioner there is great danger that articles may be bought when not needed, and that the judgment and discretion of the supervisor and the commissioner may be warped by self interest, to the great detriment of the public. According to the evidence the firms in which county commissioners were partners supplied from fifty to eighty per cent, of the supplies purchased for the county. The fact that no coercion was used to induce such purchases has little weight in cases where, as here, all the purchasing agents were employed by the county commissioners and could be discharged by them, at any time, and one of such agents was a partner with a commissioner in a firm from whom he purchased supplies. Almost all the authorities hold that transactions such as are here disclosed are condemned as being opposed to public policy, even though no statute forbids them, and we are, therefore, constrained to hold that such is the law in this State.

The defendants alleged in their answers and produced testimony tending to prove that no actual fraud was perpetrated or intended against the public in the transactions complained of in the bill; that the supplies purchased had been actually used for the benefit of the county, and it is contended that as the commissioners would have had authority under the law to purchase them from another and to pay the contract price, or in the absence of a contract, what they were reasonably worth, and as the amounts paid for same were the customary prices charged by other persons dealing in such supplies in the county, it would be inequitable to permit the county to recover the money paid for ihe supplies where they had been used and' could not be returned as was the case here. Many authorities hold that if a transaction like the ones in question is prohibited under a criminal statute prescribing a penalty, there can be no recovery of any sum whatever by the party who furnishes goods in violation of the statute, even though the other party has used them, while others hold that even in such a case the party may recover what they are reasonably worth, though he can not recover the contract price. At the time these transactions occurred we had no statute making them penal offenses, as Chapter 4020, act approved May 19, 1891, entitled “An act to prohibit officers from bidding for or entering into any contract which they are or may be interested in the letting and prescribing a penalty for the same,” applies only to contracts for the working of public roads or streets, the construction or building of bridges, the erection or building of houses, or for the performance of any other public work in which the officer was a party to the letting, and not to transactions such as'are involved in this case, and Chap. 518G, act approved May 29th, 1903, had not then been enacted. The doctrine that a county' “may become liable upon a legal implication when properly made” is expressly recognized and sanctioned in Payne v. Washington County, 25 Fla. 798, text 807, 6 South. Rep. 881, and the question we are required to determine is whether such legal implication exists in the present case. It would seem that in Indiana, and perhaps some other States, no recovery can be had even upon quantum valébat, for transactions like the ones here involved, but the great weight of authority sustains the right of the party supplying the goods to recover what he has actually expended, or what the supplies were reasonably worth where no actual fraud was intended or perpetrated, and the supplies were necessary and beneficial to the county, ap plying with modifications the general rule which imposes liability upon an individual for goods accepted and used by him, under such circumstances as to exclude the idea of a gift. This rule founded in justice is much restricted in its application to persons under disability, such as infants and married women. It is necessarily much restricted in respect to mere governmental agencies, particularly counties, whose powers are limited and restricted in many ways.. If the agents of a county, all of whom possess only limited powers, may impose liability upon the public by accepting and using in the name of the public, articles which inure to the public benefit, where the'public are given no opportunity to meet and ratify or repudiate such transaction, then the restrictions thrown around the power of’ such agents to bind the county by contract or otherwise will be of little avail. This is particularly true, where the commissioners in violation of law whether by statute or the common law rule as to public policy undertake themselves, to furnish supplies to the county which are used for the county’s benefit. A rule which will enable county commissioners to impose upon a county liability for supplies furnished by themselves merely because they have been used for the benefit of the county, with their consent, should be applied cautiously and only in cases where the supplies were necessary and beneficial to" the county. In all such cases it must not be forgotten that the county is called upon to pay for supplies which though used for a county purpose, and which the county could lawfully buy, yet in the particular case the county has been deprived of the'benefit of the unbiased judgment of its commissioners as to the necessity or advisability of incurring expense for the supplies so furnished, and that the officers whose duty it would be to decline to accept the supplies or to repudiate their use, are the very persons who are interested in forcing liability upon the county therefor. For these reasons liability should not be imposed merely because the articles used are such as the county had authority to buy or pay for and are of some benefit to the county. Furthermore the party furnishing the supplies in such cases, should not be allowed to make a profit upon the transaction, for it would be idle to condemn the transaction as illegal on the ground of public policy, and at the same time permit the party to retain the customary profits of a lawful transacion. If parties can be permitted to recover not only the money actually paid for the articles supplied, but a profit upon the transaction, even though the profit does not exceed that usually made by others upon the sale of similar articles, a premium is offered for violating the law. While there is some conflict in the authorities as to the proper measure of recovery, where the law raises the implication to pay in cases like the present we think the better rule is to confine the recovery to the actual cost to the party furnishing the supplies, provided that does not exceed the reasonable fair value, and to disallow every element of profit involved in the transactions. For authorities bearing upon the different phases of the questions herein discussed see Berka v. Woodward, 125 Cal. 119, 57 Pac. Rep. 777, S. C. 45 L. R. A. 420; Mayor v. Huff, 60 Ga. 221; City of Concordia v. Hagaman, 1 Kan. App. 35, 41 Pac. Rep. 133; Atchison County v. DeArmond, 60 Mo. 19; Goodyear v. Brown, 155, Pa. St. 514, 26 Atl. Rep. 665, S. C. 20 L. R. A. 838; Findlay v. Pertz, 66 Fed. Rep. 427, S. C. 29 L. R. A. 188; Quayle v. Bayfield County, 114 Wis. 108, 89 N. W. Rep. 892; Beebe v. Board of Supervisors of Sullivan County, 64 Hun 377; Spearman v. Texarkana, 58 Ark. 348, 24 S. W. Rep. 883; Currie v. School-District No. 26 of Murray County, 35 Minn. 163, 27 N. W. Rep. 922; City of Fort Wayne v. Rosenthal, 75 Ind. 156; Waymire v. Powell, 105 Ind. 328, 4 N. E. Rep. 886; Pickett v. School District No. 1, Town of Wiota, 25 Wis. 551; Gardner v. Butler, 30 N. J. Eq. 702; Commonwealth v. Commissioners of Philadelphia County, 2 S. & R. 193; The President and Trustees of the City of San Diego v. The San Diego and Los Angeles Railroad Company, 44 Cal. 106; Stropes v. Board of Commissioners of Greene County, 72 Ind. 42; Smith v. City of Albany, 61 N. Y. 444; 1 Dillon on Municipal Corporations (4th ed.) section 444.

We are of opinion that all transactions whereby the commissioners or those acting under their authority, procured supplies from firms in which any of the commisisioners or their purchasing agents were partners, are illegal, being opposed to public policy, and that it was proper' to enjoin the payment of warrants issued in payment for such supplies. But we think the court below erred in decreeing the repayment by the commissioners of all sums actually paid out on account of every transaction for supplies obtained from firms in which a commissioner was a partner, and hold that the commissioners can only be required to account for and pay into the treasury the full amount paid out on account of such transactions as were tainted with actual fraud, or for such supplies as were not necessary, and beneficial to the county, or which could not have been lawfully purchased by the commissioners from other persons, for the use of the county. The commissioners must, however, be held to account for and pay into the county treasury all profits or excess over the actual cost of the supplies to those who furnished them, such cost not to exceed their reasonable market value on all supplies so furnished which were nec essarp and beneficial to the county in the' purchase of which no actual fraud was perpetrated, and which the commissioners would have had authority to purchase from other persons for the use of the county. In other words the Commissioners will only he required to account for the moneys paid out by them in excess of such sums as the parties furnishing the supplies under the circumstances stated, would be permitted to recover from the county by appropriate proceedings in the courts, which recovery would not include any element of profits in the transactions.

In order that no misapprehension may arise it may be well to state that the injunction against payment of outstanding warrants issued for supplies purchased from firms in which a commissioner was a member does not operate to prevent the commissioners from issuing other warrants in lieu thereof, to the parties who furnished the supplies for such amounts as may be found proper in accordance with the rules laid down above.

The appellants contend that as Aichor and Belcher, two members of the board of county commissioners, were not members of any firm from which the supplies were obtained, and as the evidence fails to show that these two men voted to order the payment of any of the accounts criticised, it was error to enter a decree against them jointly with the other three. The answer to this contention is that the bill alleges that all the defendants as county commissioners audited all of the claims, and the answer of the commissioners does not deny, but admits the fact and nowhere asserts that Aichor and Belcher did 'iot participate and vote with the other members for the allowance and payment of the claims.

The bill alleges that two claims one in favor of Lummus & Sewall for $200, the other in favor of R. E. McDonald & Go. for $53.40 were audited and allowed November 3, 1902, but that same had not been paid when the bill was filed. The answer of the bond trustees alleges that the Lummus & Sewall warrant was paid in regular course by them before they had notice of any application for a restraining order, and the proof supports the answer in this respect. The allegation of the bill respecting the nonpayment of the other warrant was not put in issue by any of the answers. On the contrary the answer of the treasurer admits its truth. Under these circumstances we think it was proper to perpetually enjoin the payment of the last mentioned warrant though improper as to the other one.

The decree appealed from will be reversed and the cause remanded with direction that it be referred to a master to take further testimony, and to state an account in conformity with the views herein expressed, and for such further proceedings as may be conformable to equity.

Whitfield, O. J., and Shackleford, J., concur. Taylor, P. J., and Hocker, J., concur in the opinion. Cockrell, J., being disqualified, took no part in the consideration of this case.