Grady v. City of Livingston

• Decision Date: 01 July 1943
• Docket Number: 8308,8319,8320,8321.
• Citation: 141 P.2d 346,115 Mont. 47
• Parties: GRADY et al. v. CITY OF LIVINGSTON et al. (four cases).
• Court: Montana Supreme Court

141 P.2d 346

115 Mont. 47

GRADY et al. v. CITY OF LIVINGSTON et al. (four cases).

Nos. 8308, 8319, 8320, 8321.

Supreme Court of Montana

July 1, 1943

Rehearing Denied Oct. 9, 1943.

Appeal from District Court, Sixth District, Park County; S.D McKinnon, Judge.

Four taxpayers' actions by John Grady and another against the City of Livingston, a municipal corporation, the Continental Oil Company, a corporation, and others, against the City of Livingston, the A. W. Miles Company, a corporation, and others, against the City of Livingston and Neal- 01,141 P.2d Landes Company, a corporation, and others, and against the City of Livingston, the A. W. Miles Lumber & Coal Company, a corporation, and others to recover sums paid by the city to the corporate defendants. Judgments for defendants, and plaintiffs appeal.

Affirmed.

ADAIR and ERICKSON, JJ., dissenting.

Rockwood Brown, Horace S. Davis, and Franklin S. Longan, all of Billings, for appellants.

Fred L Gibson, Vilroy C. Miller, and Ed C. Jones, all of Livingston for respondents.

MORRIS Justice.

This is one of four separate actions commenced by the two taxpaying plaintiffs to recover approximately $10,000 in the aggregate paid by the city of Livingston to the corporate defendants. The plaintiffs are the same in each of the four cases but a single corporate defendant is named in each action. The four cases were briefed and argued together. The money sought to be recovered was allowed and paid on bills against the city presented in the usual form, approved and warrants issued therefor, and was for goods, wares and merchandise sold and delivered to the city by the defendant corporations, and used for municipal purposes. The city of Livingston was made a defendant when, upon demand, the city council failed and refused to commence the proceedings demanded.

The right to recover the money is predicated upon the fact that certain members of the city council and other city officials, at the times the things bought by the city were contracted and paid for, were connected with as employees or officials of the defendant corporations, and that by reason of the relations existing between such city officials and employees and the corporate defendants, the contracts between the city and the defendants were alleged to be void; that the contracts being void the defendants still retain title to the goods sold the city and the city never parted with title to the money paid for the goods. No offer is made to return the goods, which the city received and used under the alleged void contracts, and it clearly appears that any return of such goods would be impossible by reason of their having been consumed or used.

The trial court made extended findings of fact. We give the substance of such as tend to emphasize the more important issues. The issues in the four cases were the same, and the Continental Oil Company case was tried as typical of the four. So far as the record shows all of the merchandise and supplies purchased from the defendant Continental Oil Company consisted of gasoline.

In Finding No. 9 the court mentions the fact that the city bought the supplies from the Continental Oil Company and the same was consumed by the city for municipal purposes in the operation and maintenance of its water works system, its street department and for other purposes, and further finds that "the said city has not offered to return, and has not returned, any thereof, but has used and consumed the same, and that it is now and was at the time of the commencement of this action, and has been at all times since the receipt of the same by the said city, impossible for it to return the same to said defendant; that said gasoline and petroleum products sold and delivered to the said city, as alleged in each of the causes of action in the complaint contained, were at the respective times of the sale thereof, and payment therefor, of the reasonable value of the prices and amounts which said city paid for the same as hereinabove set forth, and that all of the said gasoline and petroleum products sold by defendant to the city as aforesaid, were sold at the reasonable price therefor."

In Finding No. 10 the court finds that out of the money the defendant received from the city for gasoline sold to it five cents per gallon was paid by the defendant to the state of Montana as and for the five cent tax on all gasoline sold by vendors of such products, and that pursuant to the provisions of section 2396.4, Revised Codes, the city had received back from the state such five cents per gallon as a rebate allowed on all purchases of gasoline made by the city, such rebate amounting to the sum of $351.95 and the plaintiffs in this action make no allowance for that amount. It is not to be understood that failure of plaintiffs to take this tax refund made to the city into account has any particular bearing on the merits of the actions, but certainly in an equitable action reduction of the amount demanded to the extent of such refund should have been made.

The court's Finding No. 11 is as follows:

"That all of the sales of gasoline and petroleum products made by defendant Continental Oil Co. to the said city of Livingston set forth in the complaint *** were made *** during the period from May 1st, 1937, to April 3d, 1939, and *** were received and consumed *** prior to April 3d, 1939, in the various municipal activities and business of said city, and it is, and at all times since the receipt and use thereof by said city has been, impossible for the city to return the same or any thereof *** and idle, useless and unavailing for defendant Continental Oil Co. to demand the return thereof.

That notwithstanding the facts and premises the plaintiffs and said city of Livingston have at all times aforesaid, and until March 29, 1940, the date of the commencement of this action, stood by, waited and forbore bringing any action or suit to enjoin the execution of any of the sales mentioned in the complaint herein, and forbore bringing any action or proceeding to set aside the same, and that none of said sales have been rescinded, and by the use and consumption of said gasoline and petroleum products said city has put it out of its power to restore same, or any thereof, to said defendant."

In other findings of the court it is set forth that the city records on two occasions were examined by the state examiner's office, approximately a year intervening between the two examinations, and following each examination written advice was sent by the state examiner to the city officials with directions that such advice by the state examiner be read at a regular meeting of the council. The attention of the council and mayor was called to the fact that various city officials had been guilty of violating numerous statutes, particularly section 445 of the Revised Codes, but that such officials continued to authorize purchases by the city from the corporate defendants in which the various members of the council and the mayor were interested. Following the receipt of one such advice from the state examiner, the court by Finding No. 20, sets forth: "That thereafter, on December 5th, 1938, at a meeting of the city council of the defendant city, at which the defendant M. K. Musser (9) the Mayor of the said city, presided and was present, the report aforesaid of the State Examiner was read, accepted, and placed on file by the said city council; and that then and there and thereby the said defendant, M. K. Musser, learned of its contents."

In Finding No. 21 the specific statutes that were called to the attention of the mayor and city council by the state examiner are mentioned. In another finding the court sets forth that on January 4, 1940, the plaintiffs demanded of the defendant Continental Oil Company the repayment to the city of the several sums of money received by it alleged to be in violation of law. The court's conclusions of law were as follows:

"1. That the plaintiffs are not entitled, in law or in equity, to recover in this action.

2. That the defendant, Continental Oil Co., is entitled to a dismissal of this action with its costs herein incurred.

3. That the remaining defendants herein named are entitled to a dismissal of this action with their costs herein incurred."

Judgment in accordance with such findings of fact and conclusions of law was made and entered. The appeals are from the judgments.

The actions are in equity.

Thirty-two specifications of error are assigned, which, for the purposes of argument, are grouped by counsel for plaintiffs under three "points of law" as follows:

"1. The sales described in the complaint are wholly void because of the interest therein of the mayor and members of the city council.

2. Where the contracts or sales involved are made contrary to the express prohibition of statute all sums paid by the municipality may be recovered with interest and without restitution made or offered for the services, goods, or other property received.

3. The interest which invalidates is that of an employee, or of an officer or stockholder in a contracting corporation."

We think the merits of these actions can be arrived at more directly by their consideration under the following headings which will bring before us all the essentials:

1. Are contracts made in violation of sections 444 and 445, Revised Codes, void or only voidable under section 446?

2. Do plaintiffs' bills state a cause of action?

3. Granting that the transactions between the municipality and the corporations violated the statutes, is the remedy by actions in equity or by prosecutions under the criminal law?

4. The contracts being illegal, was the city under any obligation to return the merchandise or account for its value?

5. Good faith.

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