Land, Log & Lumber Co. v. McIntyre

• Decision Date: 23 June 1898
• Citation: 100 Wis. 245,100 Wis. 258,75 N.W. 964
• Court: Wisconsin Supreme Court
• Parties: LAND, LOG & LUMBER CO. ET AL. v. MCINTYRE ET AL. (TWO CASES).

100 Wis. 245

100 Wis. 258

LAND, LOG & LUMBER CO. ET AL.

v.MCINTYRE ET AL. (TWO CASES).

Supreme Court of Wisconsin.

June 23, 1898.

Syllabus by the Judge.

[75 N.W. 964]

1. If a member of a county board of supervisors receives illegal compensation for his services, or money for articles sold by him to the county for its use, or for labor or material furnished in the construction of a highway having no legal existence, or converts money to his use appropriated for work on a public highway, an action will lie in favor of the county against such supervisor, to recover back such money.

2. Section 692, Rev. St., which prohibits a member of a county board of supervisors from in any manner being interested in any contract for the purchase of any article for the use of the county, and declares all such contracts void and that any offending member shall be deemed to have vacated his office by reason of his offense, covers contracts executed as well as executory, and renders them all void absolutely.

3. Where the statute provides that the act shall be void, and fixes a penalty for the perpetration of the prohibited act, the word “void” should be interpreted as meaning void absolutely, in accordance with the technical accuracy of the word.

4. Where a county, by the wrongful conduct of its county board, parts with county money for something which it has no legal right to acquire or do, no equitable considerations stand in the way of recovering back such money, from the mere fact that the county has received a benefit.

5. Where a public corporation has a cause of action which should be prosecuted for its use, whether legal or equitable, and its governing

[75 N.W. 965]

body neglects and refuses to institute an action therefor, a taxpayer may, on behalf of himself and all others similarly situated, institute an action in equity to redress the wrong to the corporation, making it a defendant as trustee for all its members.

Appeal from circuit court, Vilas county; W. F. Bailey, Judge.

Actions by the Land, Log & Lumber Company and others against F. W. McIntyre, trustee, impleaded with Vilas county, to compel an accounting and paying over into the county treasury certain money alleged to have been unlawfully received, and by the same plaintiffs against F. W. McIntyre and P. J. O'Malley. From orders overruling his demurrers to the complaints, defendant McIntyre appeals. Affirmed.

Action to charge defendant F. W. McIntyre as trustee of defendant Vilas county, of certain moneys alleged to have been corruptly drawn by him from its treasury, and to compel him to account therefor and pay the same over to such county for its use, the amount involved being $1,763,65. The complaint contains three causes of action, the facts being to the effect that, from April, 1894, to April, 1895, while chairman of the board of supervisors of the county, McIntyre filed numerous bills for illegal claims against the county, knowing them to be such, all of which are set forth in detail, with allegations showing such illegality, and corruptly caused such bills to be audited, and county orders to be issued to himself therefor, and such orders to be paid by the county treasurer, and that thereby, through forms of law, he transferred the money so paid from such treasury to his personal possession, and converted the same to his own use. One cause of action is for money alleged to have been drawn in the manner aforesaid, for services in excess of those allowed by law; and for pretended services, not rendered, and disbursements not made or legally chargeable; one for goods, wares and merchandise and labor furnished by McIntyre for use in constructing a so-called county road that had no existence in fact; and one for money drawn on a county order which McIntyre caused to be issued without any claim being placed on file upon which to base such order, or there being any consideration therefor. Facts are further set forth to the effect that plaintiffs are taxpayers of the county; that after McIntyre's term of office expired, and in July, 1895, they laid the matters complained of, with a full statement of the facts, before the county board, and demanded that such board institute an action to recover the money squandered as aforesaid, which was refused, and that thereupon they instituted this action in their own behalf and that of all other taxpayers of the county. The relief prayed for is that McIntyre be compelled to account and restore to the county, for its use, the money illegally and fraudulently obtained by him, as stated in the complaint, and pay the costs and disbursements of the action. A demurrer was interposed to each cause of action, for want of sufficient facts stated therein to constitute a cause of action, and for want of facts stated sufficient to show jurisdiction of the action. The demurrer was overruled, and this appeal was taken from the order entered to that effect.

D. E. Riordan and Silverthorn, Hurley, Ryan & Jones, for appellants.

Curtis & Reed and Alban & Barnes, for respondents.

MARSHALL, J. (after stating the facts).

It is suggested by appellant's counsel in support of the demurrer to the cause of action to recover back illegal compensation for supervisor's services, alleged to have been paid by the county to appellant, that plaintiffs have an adequate remedy at law under sections 2955 and 2956, Rev. St. That gives a person aggrieved by an officer's demanding and receiving of him illegal fees or compensation, a remedy at law to recover the same back, with a penalty of $25. True, if plaintiffs have an adequate, or any, remedy under such section, it is an objection to the sufficiency of the complaint that may be reached by demurrer; but it is quite clear that no such remedy exists. The sections referred to apply solely to cases where a person has been directly injured by being required to compensate an officer beyond that to which he is legally entitled. This action is to enforce a cause of action in favor of the county. It is the corporation that has been directly injured and has the primary right to proceed. Plaintiffs' interests are wholly indirect, like that of a member of any private corporation under the same circumstances. They could not proceed at law for an injury to the corporation, or in their own names for their own benefit, independent of a statute granting the remedy, and certainly there is none. Illegal acts of corporate officers, whereby its property is misapplied, squandered or lost, are not injuries to the separate interests of its stockholders or members, that can be reached and remedied in a direct action by them. As to them the injury is purely incidental and consequential, the direct injury being to the corporation itself, and must necessarily be redressed by it or for its use, for the benefit of all the members thereof. Thomp. Corp. § 4476; Dill. Mun. Corp. 915.

The next point made is directed particularly to the cause of action to recover money received by McIntyre for goods, wares and merchandise, and labor alleged to have been furnished by him to the county while he was a member of its board of supervisors, in violation of section 692, Rev. St., which prohibits a person so circumstanced from being a party to, or in any way or manner interested, either directly or indirectly, in any contract or agreement whatever with the

[75 N.W. 966]

county, for the purchase of any article whatever, required by such county, and provides that all contracts or agreements in violation thereof shall be void, and the offending supervisor, by reason of his offense, be deemed to have thereby vacated his office. The purpose of that section was unmistakably to include contracts, executed as well as executory, between members of a county board and their county for the purchase of any and all articles for its use. No member of a county board can be interested, directly or indirectly, in any such contract without being guilty of gross violation of public duty, and liable to respond therefor in damages to the corporation to the full extent of any pecuniary benefit received by him in any event, and such further sum as the corporation may have lost by his unfaithful conduct.

But it is said the county received a benefit from the property and labor furnished by appellant, and that the rule is that equity will not interfere with an executed contract under such circumstances, and compel a restitution of the money received on the illegal contract, or any part of it, while the corporation retains the benefit, and many authorities are cited in support of that view, all relating, however, to cases where, though the corporation had power to incur the indebtedness or make the expenditure, there was some violation of law in the manner of doing it. That has often been recognized and applied in this court, as in Pickett v. School Dist., 25 Wis. 551, but a distinction was there clearly made between such circumstances and those where the manner of doing the thing was not only unlawful, but the doing of the act at all was unlawful as well. The court said in the latter mentioned circumstances: “The parties acquire no rights which can be enforced either in courts of law or equity.” But in the former, the thing contracted for being itself unlawful and beneficial, it would seem improper to allow the party who may be entitled to avoid it, to receive and retain the benefit without any consideration at all. The court was there speaking of a contract voidable as against public policy under common-law principles as distinguished from those void absolutely as not within the power of the corporation. The same distinction was recognized in Beyer v. Town of Crandon (Wis.) 73 N. W. 771, where it was held by this court, that performance of a contract with a town to construct a road that has no legal existence, does not create a claim, legal or equitable, against such town. That rule applies to the greater part of the sum sought to be recovered by the second...