People's Savings Bank v. Big Rock Stone & Construction Co.

• Decision Date: 04 February 1907
• Citation: People's Savings Bank v. Big Rock Stone & Construction Co., 81 Ark. 599, 99 S. W. 836 (Ark. 1907)
• Parties: PEOPLE'S SAVINGS BANK v. BIG ROCK STONE & CONSTRUCTION COMPANY
• Court: Arkansas Supreme Court

99 S.W. 836

81 Ark. 599

PEOPLE'S SAVINGS BANK v. BIG ROCK STONE & CONSTRUCTION COMPANY

Supreme Court of Arkansas

February 4, 1907

Appeal from Pulaski Chancery Court; Jesse C. Hart, Chancellor affirmed.

STATEMENT BY THE COURT.

On the 18th of March, 1904, W. E. Lenon was mayor of the city of Little Rock.As mayor he was president of the board of public affairs of the city, which board was composed of himself Herman Kahn and J. L. Reid.This board was intrusted with the letting of paving and other contracts for the performance of work for the city and with the inspection and acceptance of such work.This board on the 18th day of March after due advertisement let a contract for the grading and paving of Shell Alley in that city to one Chas. T. Torbert, he being the lowest bidder for the work, for which work the board agreed to pay him the sum of $ 667.50.The contract was signed by W. E. Lenon as president of the board.

Lenon at this time was a stockholder in the People's Bank and president thereof.To enable Torbert to complete his contract with the city, the bank advanced him $ 147.43, and took an assignment of his claim against the city.

Torbert became indebted to the Big Rock Stone & Construction Company in the sum of $ 223.61 for crushed rock, and to the Arkansas Brick & Manufacturing Company in the sum of $ 82 for cement this crushed rock and cement being used by Torbert in paving the alley.Afterwards these companies brought an action in equity to subject the money due from the city to Torbert for paving the alley to the payment of their debts against him.The People's Bank filed an intervening petition, claiming the fund by virtue of its loan to Torbert and his assignment to the bank of his claim against the city.

The plaintiffs filed an answer, in which they alleged that, at the time the bank made the contract with Torbert, Lenon was mayor of the city and president of the board of public affairs and president and stockholder in the bank, and that as such he acted for the bank in securing the contract with Torbert set up in the intervening petition of the bank.The answer further alleged that by this transaction Lenon became a beneficiary of and party to the contract, and placed himself in a position where he could not properly represent the city in the final inspection and acceptance of the work done by defendant; that, notwithstanding this dual interest Lenon acted as president of the board of public affairs, and as such accepted the work of defendant; that it would therefore be against the policy of the law to permit the intervener to enforce its alleged contract with defendant.

On the hearing the chancellor sustained the answer of the plaintiffs, and found in their favor, and gave judgment accordingly, and, the money due from the city to Torbert having been paid into the registry of the court, the court made an order that such money be paid to plaintiffs to be applied on their claims.The bank appealed.

Decree affirmed.

Bradshaw, Rhoton & Helm, for appellant.

1.If an ordinance is passed by the council authorizing the expenditure, and bids are advertised for, any person can make a contract with the Board of Public Affairs, provided his is the lowest bid, notwithstanding he may be related to a member of the board, or associated with him in business.Kirby's Digest, §§ 5643, 5644.There is no allegation in the complaint that would entitle appellees to conventional subrogation; but the allegations of the intervention, and the proof, show an assignment of Torbert's claim to appellant whereby conventional subrogation is established.56 Ark. 480.The legal right to the fund is in appellant, because it furnished the money which was used to pay laborers and to pay for material, and which could not have been obtained except upon assignment of the amount due from the city.58 Ark. 348;33 Mich. 61;47 Mich. 236.A contract is not absolutely void between two corporations because some of the directors of the two are common to both.33 L. R. A. 788;92 Ind. 518.

2.The contract is not void as against public policy, but in any case appellees can not complain.Only parties to a contract void or voidable as against public policy can be heard to complain.The presumption of law is in favor of the legality of a contract as against its illegality, and the general rule is to give a contract that interpretation which will give it validity.117 U.S. 567;15 Am. & Eng. Enc. of L. 3;80 Ind. 245.See, also, 11 Ark. 475.When a contract based upon a lawful consideration is for the performance of an act capable of being performed in a legal manner, the contract is valid, even though one of the contracting parties violates the law.15 Am. & Eng. Enc. of L. 937.

Murphy, Coleman & Lewis, for appellees.

The appellant's contract with Torbert can not be enforced because its enforcement would be against public policy.

As to whether or not a contract is against public policy, the test is the evil tendency of the contract, and not the actual results; and if its tendency is opposed to the interests of the public, it is invalid, even though the intent of the parties was good, and no injury to the public would result in the particular case.9 Cyc. 481;63 Ark. 320-21;15 Am. & Eng. Enc. of L. (2 Ed.), 934;49 Am. Rep. 746;43 N.Y. 147;137 Ind. 655;80 Am. Dec. 677.See, also, 103 U.S. 658;Id. 261;135 U.S. 507;27 Wash. 543;70 N.C. 393;80 Ky. 681;136 Mass. 265;30 Tex. Civ. App. 561;39 Am. Rep. 17.It is immaterial whether or not it is a party to the contract who brings to the notice of the court the fact of its being against public policy."It is for the protection of public interests that the courts take notice of the immorality of such contracts whenever by any means made aware of it."3 F. 10.The bank can not enforce a contract which its president has made in violation of public duty.Cook on Stock & Stockholders, § 663a;Id.§ 6; Spelling on Priv. Corp. §§ 829, 831;31 Mich. 490;85 Tenn. 572;23 A. 802;87 Ala. 211;20 F. 700.

RIDDICKJ. MCCULLOCH, J., dissenting.

OPINION

RIDDICK, J., (after stating the facts.)

The only question in this case is whether it is against public policy to permit a bank of which the mayor of a city is a stockholder and president to take an assignment of the claim of a contractor against the city for the price of work which he has performed for the city, and which work must be inspected and accepted for the city by a board of which the mayor is chairman?The bank, acting through its president and other officers, in good faith advanced the contractor certain sums of money to enable him to carry out his contract with the city, and to secure the loan took from him an assignment of his claim against the city.At the time this was done the work had not been completed, and therefore had not been inspected or accepted by the city.It would certainly be against public policy to permit the mayor of a city to take an assignment of such a claim to himself and to become personally interested in this way in a contract against the city of which he was the chief officer and a member of a board whose duty...