Bedell v. Nichols

• Decision Date: 14 March 1927
• Docket Number: 25916
• Parties: Fred L. Bedell, Appellant, v. J. C. Nichols, D. M. Pinkerton, W. A. Armour, William Volker, James E. Nugent, Carolyn M. Fuller, J. C. Nichols Investment Company, Charles W. Armour, and School District of Kansas City
• Court: Missouri Supreme Court

292 S.W. 21

316 Mo. 881

Fred L. Bedell, Appellant, v. J. C. Nichols, D. M. Pinkerton, W. A. Armour, William Volker, James E. Nugent, Carolyn M. Fuller, J. C. Nichols Investment Company, Charles W. Armour, and School District of Kansas City

No. 25916

Supreme Court of Missouri

March 14, 1927

Appeal from Jackson Circuit Court; Hon. Thad B. Landon Judge.

Affirmed.

Proctor & Phillips for appellant.

(1) The evidence showed (when the transaction is regarded in its substance and not by its form): (a) That defendant J. C Nichols purchased the 74 acres of land and sold 15 acres to the school district at a time when he was a member of the school board, making a profit for himself, or for his company, J. C. Nichols Investment Company, of $ 22,500; or (b) It showed a transaction whereby J. C. Nichols obtained 59 acres of land, in a deal dependent on and concurrently consummated with the purchase by the school district of a 15-acre tract, for a sum which would reduce his price $ 22,500 and furnish all of the cash. Either of which, under the issues raised by the petition and the answers constituted a transaction opposed to a public policy and absolutely void. 2 Dillon on Municipal Corp., secs. 772, 773; 6 R. C. L. 739, 730; 18 C. J. 422; 25 C. J. 1120; 1 Bigelow on Frauds, p. 262; 4 Fletcher on Corp., sec. 2337. (2) A transaction in which a public officer is interested directly or indirectly is opposed to public policy and absolutely void. 1 Abbott on Public Corp.; 2 Dillon on Municipal Corp., secs. 772, 773; 2 McQuillin on Municipal Corp., 1104; 2 Beach on Public Corp., 1332; 24 R. C. L. 579, 580; Land & Lumber Co. v. McIntyre, 100 Wis. 245; People v. Overyasel, 11 Mich. 222; Smith v. City of Albany, 61 N.Y. 444; Dwight v. Palmer, 74 Ill. 295; Berka v. Woodward, 123 Cal. 129; McGee v. Lindsay, 6 Ala. 16; Ft. Wayne v. Rosenthal, 75 Ind. 156; Mayor of Macon v. Huff, 60 Ga. 221; Sebring v. Starner, 197 N.Y.S. 202; Smith v. Dandridge, 98 Ark. 38, 34 L. R. A. (N. S.) 129; Wertz v. School District, 78 Iowa 37; Independent School Dist. v. Collins, 15 Ida. 535; Noble v. Davidson, 177 Ind. 19; Bay v. Davidson, 133 Iowa 688; R. S. 1919, secs. 2585, 3336, 3340, 4462, 7048, 7636, 7656, 8041, 8237, 10847, 11407, 11458, 12262, 12482; State ex rel. v. Miller, 100 Mo. 439; Seaman v. Levee District, 219 Mo. 1.

Haff, Meservey, Michaels, Blackmar & Newkirk for respondents J. C. Nichols and J. C. Nichols Investment Company.

(1) There was no evidence tending to support the allegations in appellant's petition, and the decree for the respondents was right. 21 C. J. 672, 682; Cosgrove v. Realty Co., 175 Mo. 100; Ross v. Ross, 81 Mo. 84; Priest v. Way, 87 Mo. 16; Lenox v. Harrison, 88 Mo. 491; Vasquez v. Ewing, 24 Mo. 31; Newham v. Kenton, 79 Mo. 382; Rumbolz v. Bennett, 86 Mo.App. 177; Georgia v. Einstein, 218 F. 55; McNair v. Biddle, 8 Mo. 267. (2) The interest of J. C. Nichols in the purchase of the 15 acres in controversy was not adverse to that of the board of directors. Escondido Co. v. Baldwin, 84 P. 284; Worrell v. Jurden, 36 Nev. 85; 31 Cyc. 1449; 2 C. J. 714; Mechem on Agency, sec. 67; Stone v. Slattery's Admr., 71 Mo.App. 442; Wilson v. Ins. Co., 90 Kan. 355; Casey v. Donovan, 65 Mo.App. 521; Lamb Knit-Goods Co. v. Lamb, 119 Mich. 568; British Am. Assurance Co. v. Cooper, 40 P. 150; Brown v. Brown, 39 N.E. 983; Collar v. Ford, 45 Iowa 331; Herman v. Martineau, 1 Wis. 151; Amber-Petroleum Co. v. Breech, 111 S.W. 668; 2 C. J. 706; City of Topeka v. Huntoon, 46 Kan. 634; Smedley v. Kirby, 79 N.W. 187. (3) There is no law prohibiting a school board from purchasing property in which one of its members has an interest. Sec. 11407, R. S. 1919. (4) Even if the sale had been made by Nichols himself instead of C. W. Armour, there could be no recovery in this case without a return of the property. 2 Dillon on Municipal Corp., sec. 773; Kitchen v. Ry. Co., 69 Mo. 224; St. Louis v. Alexander, 23 Mo. 528; Morawetz on Corporations, sec. 527; Sparks v. Jasper Co., 213 Mo. 218; Seaman v. Levee Dist., 219 Mo. 1.

McCune, Caldwell & Downing for other respondents.

(1) The evidence shows conclusively that neither J. C. Nichols nor the Nichols Investment Company purchased from the defendant Charles W. Armour the seventy-four acres of land in controversy at the price of $ 3,500 per acre, and neither Nichols nor the Nichols Investment Company resold to the school district fifteen acres of said 74 acres at $ 5000 an acre, nor at any other price, and neither Nichols nor the Nichols Investment Company derived any profit whatever from the sale of the said 15 acres. (2) A contract in which a director of the school district is interested is voidable only and not void, unless expressly so declared by statute. Bay v. Davidson, 9 L. R. A. (N. S.) 1014, note; Trainer v. Wolfe, 140 Pa. St. 279; Diver v. Savings Bank, 126 Iowa 691; Lower Kings River Recl. Dist. v. McCullah, 124 Cal. 175; Town of Hartley v. Floete Lumber Co., 185 Iowa 861; Marshall v. Ellwood City Borough, 189 Pa. 38.

OPINION

White, J.

This suit was brought by the plaintiff as a taxpayer. The defendants Nichols, Pinkerton, W. A. Armour, Volker, Nugent and Fuller were directors of the School Board of Kansas City. The defendant J. C. Nichols Investment Company was a corporation. Charles W. Armour was the owner of certain land which was sold to the School District of Kansas City. The petition on which the case was tried -- a bill in equity -- alleged that defendant J. C. Nichols and the J. C. Nichols Investment Company, a corporation, purchased of Charles W. Armour a tract of 74 acres situated south of 65th Street, and west of Wornall Road in Kansas City, for the price of $ 3500 an acre, and that J. C. Nichols and the Nichols Investment Company resold to the School District of Kansas City 15 acres of the tract for the price of $ 5000 per acre, or $ 75,000, all cash, thereby making a profit of $ 1,500 per acre, or $ 22,500; that this profit was made by J. C. Nichols while a member of the school board. It is then alleged that the transaction with the school board was without consideration, and that the school board was without authority to consent to the transaction whereby Nichols and the Nichols Investment Company realized a profit of $ 22,500.

It is further alleged that the plaintiff, a taxpayer, had demanded of the defendant directors of the School District of Kansas City that they obtain from defendants Nichols and the Nichols Investment Company the said sum of $ 22,500, with which demand the directors refused to comply. Judgment for $ 22,500 and interest, against the defendants in the name of the School District of Kansas City, is prayed for.

Charles W. Armour owned a large tract of land, "the Armour farm," of which the 74-acre tract mentioned in the petition here was a part. A few months previous to the transactions complained of the J. C. Nichols Investment Company had purchased 230 acres of the Armour farm, separated from the 74-acre tract by Wornall Road. The principal undisputed facts, including documents, are as follows:

Charles W. Armour was a resident of Kansas City. One E. H. Peabody was his private secretary, and one H. R. Ennis was a real estate agent in charge of Armour property for sale. Josephine F. Kelly was stenographer in the office of Ennis.

On May 17, 1922, a contract was entered into between Josephine F. Kelly and Charles W. Armour whereby Armour agreed to sell to Josephine F. Kelly the tract containing 74 and a fraction acres, at $ 3500 per acre, the total price being $ 260,032. The contract recited that the purchaser had paid as earnest money ten thousand dollars and was to pay $ 65,000 additional on delivery of a warranty deed. The balance of the purchase price was to be paid: one-third in five years; one-third in seven years; one-third in ten years. Attached to this contract was a letter from J. C. Nichols to Mr. Peabody, Armour's secretary, dated May 18, 1922, in which he stated that he approved the contract, had deposited the $ 10,000 mentioned, and guaranteed the payment of the remaining $ 65,000.

A contract dated May 26, 1922, between Josephine F. Kelly and the School District of Kansas City, whereby she agreed to sell and convey to the School District of Kansas City, for the sum of $ 75,000, the 15 acres described, $ 5000 to be paid down, the remaining $ 70,000 to be paid upon delivery of a general warranty deed for the tract. The contract recites:

"This contract is made with the understanding that seller is negotiating a contract for the purchase of the above described property and other property from Charles W. Armour, and seller shall not be held liable in case she is unable to procure title from said Charles W. Armour."

A warranty deed acknowledged June 19, 1922, whereby Charles W. Armour conveyed to the School District of Kansas City the 15-acre tract for the sum of one dollar and other valuable considerations. This deed was dated June 16, 1922, acknowledged June 19, 1922, and filed for record June 27, 1922.

A warranty deed from Charles W. Armour to Josephine F. Kelly for a consideration of one dollar and other considerations, conveyed the 59 and a fraction acres remaining of the 74-acre tract. That deed was dated June 17, 1922, acknowledged June 19, 1922, and filed for record April 12, 1923.

Deed of trust from Josephine F. Kelly to Elbert H. Peabody, trustee conveying the tract of land last mentioned to secure the payment of three notes dated June 19, 1922, the first note for $ 61,678, due in five years; the second note for $ 61,677, due in seven years; and the third for $ 61,677, due in ten years. These three notes mentioned in the contract constitute the entire consideration for the 59 and fraction acres, and the balance of the entire consideration of $ 260,032...