McGuffin v. Coyle

• Decision Date: 04 September 1906
• Parties: McGUFFIN v. COYLE et al.
• Court: Oklahoma Supreme Court

86 P. 962

16 Okla. 648, 1906 OK 5

McGUFFIN v. COYLE et al.

Supreme Court of Oklahoma

September 4, 1906

For majority opinion, see 85 P. 954.

Dissenting opinion.

Where a note is made payable to a certain person or persons named and there is nothing in the note to indicate, and no showing in the evidence, that any other person has any interest therein, the presumption will be that the note is for the personal benefit of the payee named therein.

BURWELL J.

A recovery on the contract involved in this case is denied by the majority of this court under the theory that a contract taken by an officer of a railroad corporation in his individual name for the payment of money to himself, in consideration of the corporation performing some act, is presumptively for his personal benefit, and in violation of his duties to his principal, and therefore void as against public policy. My Brethren evidenty desired to fix a high standard for the conduct of corporate officers and agents by condemning a contract taken in the name of such; but in this attempt they have in effect branded as corrupt and dishonest or at least as corrupting in its tendencies, a simple obligation which is capable of a different interpretation. This in my opinion is unwarranted, and in violation of the plain provisions of statutory enactment, and the general law of the land as declared by the text-writers and the courts of last resort. Were the particular contract in question the only one to be affected by this decision, I might, although firmly convinced of the injustice the rule imposes, be content with recording my vote against it; but as many other similar contracts must be measured by the standard adopted, I feel impelled to express my disapproval, and the reasons which have directed my mind to regard the act of an agent or officer of a corporation as honest, unless by its terms it is capable of no such construction, until by affirmative evidence it is shown to be corrupt and in violation of the rights of his principal. The record in the case is short, and there is but little room for disagreement as to the facts. I desire, however, to state them in the order of their occurrence so that they may be analyzed, weighed, and considered intelligently in the light of the authorities which I hope to refer to, and which I believe sustain the position here taken.

On July 29, 1899, U. C. Guss and others, at the request of Henry E Asp. Esq. (who was at the time the attorney for the Atchison Topeka & Santa Fé Railroad Company for Oklahoma), and other officers of such company, incorporated and organized the Eastern Oklahoma Railway Company. This company was evidently organized as a construction company, for the purpose of extending the lines of the Santa Fé Company. A contract was then entered into with Coyle & Guss, whereby they were to procure the right of way to Cushing; the Santa Fé Company paying therefor by vouchers issued by Mr. Asp. The evidence is not clear as to whether this contract of Coyle & Guss was with the Eastern Oklahoma Railway Company or with the Atchison, Topeka & Santa Fé Railroad Company, but in the light of all of the evidence it is fair to assume that it was with the latter. Still, if it be determined that it was with the other company, the evidence shows that Coyle & Guss had a contract whereby they were to procure the right of way, and beyond this and the fact that the right of way was actually paid for by the Santa Fé Company, we are in absolute ignorance as to its terms and provisions. Coyle & Guss then entered into a contract with the plaintiff in error (L. K McGuffin) whereby he agreed to pay to them the sum of $250, as shown by the following instrument, which is the contract in controversy: "$250.00. Cushing, Okla., 7-23d, 1901. July 1st, 1902. If Santa Fé R. R. is built to Cushing by this date (July 1, 1902) A. T. & S. F. R. R. to Cushing, Oklahoma, in consideration of its being built for value received, as principals promise to pay to the order of Coyle & Guss, two hundred fifty dollars at Cushing Bank, Cushing, Oklahoma. This note is given upon the consideration that a failure to comply with the above requirements shall render this note void. [Signed] L. K. McGuffin." The right of way was obtained, and the road built as agreed. If the contract of Coyle & Guss was with the Santa Fé Company, then Guss was not an officer of that company, unless it be said that the Eastern Oklahoma Railway Company was a mere agent of the Santa Fé Company, and, as such, its directors occupied confidential relations to the latter company. This is the view evidently taken by the majority of the court, and while I feel that such position is an extreme application of the rule, I contend that even if it be admitted, in the absence of evidence to the contrary, it must be presumed that Coyle & Guss acted as honest men in taking the contract in question, and with the full knowledge and authority of the Santa Fé Company, and for a valuable consideration flowing from them to it. For aught the record discloses, Coyle & Guss were to reimburse the Santa Fé Company for the money advanced by it for the right of way, in consideration of the right to take this and other like contracts; or these bonus contracts may have been taken under an agreement with the Santa Fé Company in consideration of the service of Coyle & Guss in securing the right of way. Either of these, or any one of many other arrangements, would be fair and permissible under the law. I admit that the mere fact that the contract is made payable to Guss, as one of the payees (if it be held that he occupied a confidential relation to the Santa Fé Company), is a circumstance which may be considered with other affirmative evidence in determining the question of fair dealing on his part with such company; but it is not alone sufficient to overcome the presumption of honesty. The most that can possibly be said is that the contract might be dishonest. The mind can as readily conceive of circumstances from which it could have sprung and wherein every act from the beginning to the consummation of the entire transaction could be influenced by integrity and uprightness. Therefore the court should have treated it as honest rather than dishonest, as having been executed for a valuable consideration, in preference to declaring it to be in violation of good morals, and corrupting in its tendencies.

Where a contract is capable of two interpretations, one consistent with honesty, and the other indicating fraud and a breach of duty, the former should be adopted. To hold otherwise would be to admit that the majority of men are unworthy of confidence and trust. The converse is not only true, but has been recognized by the law for hundreds of years. Attention is directed to a few of the authorities: Merrill v Melchior, 30 Miss. 516: "If a contract is susceptible of two interpretations, one legal and the other illegal, that interpretation shall be given to it which renders it valid." 2 Chitty on Contracts, p. 977: "It is also a maxim in courts of equity that wherever confidence is necessarily reposed by one, and the influence which naturally grows out of that confidence is possessed by the other; and such confidence is abused or influence exerted to get an advantage at the expense of the confiding party; a contract obtained by such means will not be permitted to stand, although it could not have been impeached if such confidential relation had not existed. The presumption of law, however, is in favor of the legality of a contract; and therefore, if it be reasonably susceptible of two meanings, one legal and the other not, that interpretation shall be put on it which will support and give it operation." Guernsey v. Cook, 120 Mass. 501: "The contract, if reasonably susceptible of two meanings, one legal and the other not, must indeed receive an interpretation which will support rather than defeat it, and the presumption is in favor of its legality." Pomeroy on Contracts, footnote 3 at bottom of page 365: "The agreement must be legal or illegal, and it is not within the discretion of the court to refuse specific performance because an agreement savors of illegality; it must be shown to be illegal. This theory is certainly in accordance with the general view stated in the text that the defense of illegality is often an unrighteous one which courts do not favor, and never sustain out of regard to the party urging it. If this be true, the burden most clearly ought to rest upon the one who alleges the illegality." 1 Current Law, p. 638: "A contract is to be held invalid only when it will admit of no other construction." Equitable Loan & Security Co. v. Waring et al. (Ga.) 44 S.E. 320, 62 L. R. A. 93: "It will not be presumed that people intend to violate the law, and the language of their undertakings must, if possible, be so construed as to make the obligation one which the law would recognize as valid. All ambiguities are to be resolved in favor of legality and against illegality. The contract is to be held illegal only when it will admit of no other construction." The Supreme Court of Nebraska in the case of Horton v. Rohlff, 95 N.W. 36, said: "The rule is that the contract should be supported if possible, rather than defeated. If a contract admits of more than one construction, one of which will render it inefficacious or nullify it, that construction should be adopted which will carry it into effect, for there is no presumption against the validity of contracts. Now, can we suppose that the parties sit down to make a contract providing for a particular event, when that very event would make it void." Many other authorities might be cited to the same effect. This, however, is unnecessary, as the general rule will hardly be denied. The...