Goodrich v. Northwestern Telephone Exchange Co.

• Decision Date: 05 December 1924
• Docket Number: No. 24104.,24104.
• Citation: 201 N.W. 290,161 Minn. 106
• Parties: GOODRICH v. NORTHWESTERN TELEPHONE EXCHANGE CO.
• Court: Minnesota Supreme Court

201 N.W. 290

161 Minn. 106

GOODRICH v. NORTHWESTERN TELEPHONE EXCHANGE CO.

No. 24104.

Supreme Court of Minnesota.

December 5, 1924.

Appeal from District Court, Anoka County; Arthur E. Giddings, Judge.

Action by George H. Goodrich, in his own behalf and for others similarly situated, against the Northwestern Telephone Exchange Company. From the order entered, defendant appeals. Reversed, and judgment for defendant.

Hoke, Krause & Faegre and E. A. Prendergast, all of Minneapolis, for appellant.

Will A. Blanchard, of Anoka, for respondent.

WILSON, C. J.

This case has been in this court before, and a very full statement of the facts is found in 148 Minn. 219, 181 N. W. 333. Relative to the consideration for the contract, as imposed upon plaintiff and 17 other persons, who are parties of the second part as expressed in the contract, we find this language:

"In consideration of the concessions made as aforesaid, and in view of the general compromise and settlement of the telephone situation, second parties agree to use all reasonable means to prevent telephone agitation in the city of Anoka and endeavor to secure and cause to be maintained friendly relations between the first party and its patrons."

The allegations of the complaint that the contract was made were met by a general denial in the answer. This written instrument was signed April 21, 1908, and the 18 signers, as parties of the second part, included the mayor and three members of the city council, which was composed of six members and the mayor. In fact, the city council selected a committee, and the local commercial club selected a committee, and these two committees selected the 18 men as a general committee to negotiate with defendant. The 18 men signed the contract. Shortly prior to that time, the Tri-State Telephone Company, which then had merely a long-distance station in the city, had made application to the city council for a franchise to install and operate a local exchange in Anoka. This was inimical to the interests of defendant. The evidence now explains the meaning of "telephone agitation," as used in the contract. It is made to appear that what these 18 men agreed to do, as a consideration for this contract, was to use their influence not to let the Tri-State Telephone Company come into Anoka; that they would not support another company; that each individual member of the committee was to use his influence, where necessary, to keep the Tri-State from obtaining any concessions. The purport of the whole thing was simply this: The Tri-State was trying to get a franchise to put a local exchange in and the defendant did not want this, and these men tried to put a "damper" on the Tri-State getting subscribers, and they agreed to use their influence against this, and they did so use such influence. Thereafter the Tri-State made some effort to get into Anoka, but in the language of one of the committee "it never made any progress. * * * The personnel of the committee was sufficient for that." In other words, he said this committee was such that its influence on the city council was all that was necessary. He further testified that, in his opinion, their influence was strong enough to prevent any subsequent city council permitting the Tri-State to get into Anoka. This opinion is supported by the fact that the Tri-State did not get a franchise. The defendant had, in 1908, about 700 subscribers, and the contract was to continue until its subscribers reached 1,000.

Is a contract based upon such consideration valid? Here we have a majority of a city council, with other leading citizens, making an agreement to exert their influence upon the city council, relative to a matter then pending before it. The contract committed all these parties to that action for an indefinite time, regardless of changing conditions which might affect the public interest, and the council thus became fettered by this action, so that it could not later exercise freedom of judgment on then unknown future opportunities. True, they got what is now a discriminatory rate, but they gave up and surrendered the free judgment of the council as to all other opportunities. The council was deprived of the power of discretion, always desirable, concerning matters of public concern.

The individual men who were not city officials contracted to exercise their influence upon the local legislative body; the 18 men contracted to exercise such influence upon future legislative bodies, regardless of changed conditions. In short, these men were undertaking, in consideration of the rates made by the defendant, to sell their influence upon the city council, as well as to disarm the existing council of freedom of judgment and power of discretion. These men are not charged with corrupt intent. Far from it. They were doubtless merely trying to drive a good bargain.

A contract based upon an illegal consideration is void. Dunnell's Digest, § 1875. A city council should always be free to exercise its judgment and discretion, in making contracts for the city, so that it may contract with persons who will execute them most faithfully, and at the least expense to the taxpayers. Considerations as to the most efficient and economical mode of meeting the public wants should alone control. It must at all times be a free agency to obtain and give service. Such rule is dictated by public policy, and whatever violates this rule is against public policy. The restriction upon the council now under consideration, placed there by a majority of its members, and the agreement, by private citizens, to use their influence upon the existing and future councils, introduce elements into the transaction that do not have the approval of public policy. Assuming that the three members of the council, who were not parties to this agreement, but who were, perchance, the unconscious victims of this contractual influence, would try to follow the dictates of their judgment and discretion in matters incompatible with the secret consideration of this agreement, we can readily see how the efficiency of their ability would be throttled by the invisible, but controlling, influence. Such extraneous secret influence on legislative officials received, perhaps, in the best of faith as coming from a free and untrammeled motive, is dangerous in the extreme. It was, in essence and in effect, against the soundest principles of public policy. This element was not disclosed by the writing itself. Why should the court uphold a contract based upon a secret consideration, which, if known, would tend largely to defeat its purpose? This is the best evidence of the insidious tendency of such agreements. In fact, this should be regarded as a conclusive badge of corrupt motive; not in the sense that there was in fact such, but in the sense that, under such circumstances, the court will not listen to a claim of good motive. Judicial aid will not be given to either party to such an agreement, not because it wants to help either party, but because the agreement is tainted. 9 Cyc. 546. The fact that one of the parties will be benefited by the refusal to enforce such a contract is of no moment. In the instant case, however, it must be remembered that respondents are seeking to uphold a discriminatory rate. Then the contract is of no great importance to respondents, because, if upheld as against the present attack, it would have to fall under the power of the Railroad and Warehouse Commission, at any time it might find that the...