Currie v. School-District No. 26 of Murray County

• Decision Date: 19 April 1886
• Citation: 27 N.W. 922,35 Minn. 163
• Parties: Neil Currie v. School-District No. 26 of Murray County
• Court: Minnesota Supreme Court

27 N.W. 922

35 Minn. 163

Neil Currie v. School-District No. 26 of Murray County

Supreme Court of Minnesota

April 19, 1886

The plaintiff brought this action in the district court for Murray county to recover upon three orders issued by Harris Scovell, the clerk of the defendant, attested by Mons Larson the director, and directed to the treasurer, who had refused payment. The first order was drawn in favor of Mons Larson or order, for labor on schoolhouse; the second was drawn in favor of H. Scovell, or order, for labor on school-house; the third was drawn in favor of Harris Scovell, or order, for stove, pipe, and fuel, and all three were purchased for value by the plaintiff. The action was tried before Perkins, J without a jury, who found the facts substantially as recited in the opinion, and directed judgment for defendant. Plaintiff appeals from the judgment.

Judgment affirmed.

B. H. Whitney and John Lind, for appellant.

H. C. Grass, for respondent.

Vanderburgh J. Berry and Mitchell, JJ., dissenting.

OPINION

Vanderburgh, J.

It is found, and must be taken as true for the purposes of this appeal, that money for the erection of a school-house had been provided by the defendant school-district, and its erection duly ordered; and also that Mons Larson, director, C. C. Cole, treasurer, and Harris Scovell, clerk, constituted the board of trustees. The court also found "that the board of trustees entered into a contract with Mons Larson aforesaid, who was then director of said district, and one of said board of trustees, whereby the said Mons Larson agreed to erect a school-house in said district from materials supplied by the district for the agreed price of two dollars and fifty cents per day; and that in building said school-house the said Mons Larson, with the consent of Harris Scovell, clerk, as aforesaid, employed one Howard Scovell, at the agreed price of $ 1.50 per day." It is further found that Larson erected and completed the house pursuant to the contract, and that the compensation agreed to be paid him was just and reasonable. It also appears that a school-district order was executed and issued to Larson for the amount due him under the contract, which is the first cause of action in the complaint.

The validity of this order is disputed on the ground that the contract so made with the trustees by one of their number was against public policy, and voidable by the district. In Jones v. Morrison, 31 Minn. 140, 148, (16 N.W. 854,) it was held that a director of a private corporation could not act or form a part of a quorum to act on a proposition to increase his own compensation. A director or trustee is not permitted to be a party to a contract entered into between himself and other trustees or agents of the corporation, stipulating for his services or employment upon terms, and for a compensation, fixed by such contract. That is to say, such contract may be repudiated by the corporation, at its election. Gardner v. Butler, 30 N.J.Eq. 702, 721; Rider v. Union India Rubber Co., 5 Bosw. 85, 97; Butts v. Wood, 37 N.Y. 317.

In the case of Aberdeen Ry. Co. v. Blaikie, 1 Macqueen 461, 471, the court states the reason of the rule as follows: "It is the duty of such agents so to act as best to promote the interests of the corporation whose affairs they are conducting. Such agents have duties to discharge of a fiduciary character towards their principal, and it is a rule of universal application that no one having such duties to discharge shall be allowed to enter into engagements in which he has, or can have, a personal interest conflicting, or which possibly may conflict, with the interests of those he is bound to protect. So strictly is this principle adhered to that no question is allowed to be raised as to the fairness or unfairness of a contract so entered into; * * * so inflexible is the rule that no inquiry on that subject is permitted." Story, Agency, § 210; 1 Story, Eq. § 322; Flagg v. Manhattan Ry. Co., 20 Blatchf. 142, 10 F. 413; S. C. 21 Am. Law Reg. 787, 788; Cumberland Coal Co. v. Sherman, 30 Barb. 553, 572; Stewart v. Lehigh Valley R. Co., 38 N.J.L. 505; Smith v. City of Albany, 61 N.Y. 444; Marsh v. Whitmore, 88 U.S. 178, 21 Wall. 178, 22 L.Ed. 482; Wardell v. Railroad Co., 103 U.S. 651, 658, 26 L.Ed. 509.

In the case at bar, the defendant is a public corporation, or quasi corporation, with limited powers, and the duties and authority of the trustees are carefully defined by the statute; and although a majority of the board may make or authorize contracts at a meeting called for such purpose, of which all the members are notified, (Laws 1881, c. 41, § 3,) yet the rule as above stated applies with full force in such cases. The trustees, occupying a fiduciary relation as agents of a common principal, cannot contract with each other so as to bind the district by the terms of a mutual engagement between them. That is to say, such contract is voidable by the district, at its option, and it may resist the enforcement thereof. Pickett v. School-District, 25 Wis. 551, 558. Junkins v. Union School-District, 39 Me. 220, and Rogers v. Danby Universalist Soc., 19 Vt. 187, are in conflict with these views, but we think these cases are not sustained by authority.

As before indicated in the authority above quoted from, it matters not that the contract seems a fair one. The rule is a salutary one, founded on public policy, to guard against the hazard of abuse, and cannot be departed from to meet the exigencies of particular cases. Stewart v Lehigh Valley R....