Smythe's Estate v. Evans

• Decision Date: 20 April 1904
• Parties: SMYTHE'S ESTATE et al. v. EVANS.
• Court: Illinois Supreme Court

209 Ill. 376

70 N.E. 906

SMYTHE'S ESTATE et al.

v.EVANS.

Supreme Court of Illinois.

April 20, 1904.

Appeal from Appellate Court, First District.

Proceedings in the probate court for the allowance of a claim of Charles H. Evans against the estate of Andrew E. Smythe, deceased. From a judgment of the Appellate Court (108 Ill. App. 145) affirming a judgment of the circuit court in favor of the claimant rendered on appeal from an order of the probate court disallowing the claim, the estate of the deceased and his sole heir appeal. Reversed.John T. Richards, for appellant Smythe's Estate.

Jesse A. & Henry R. Baldwin, for appellant Smith.

Kretzinger, Gallagher & Rooney, for appellee.

Appellee, on September 21, 1899, filed his claim for $125,000 in the probate court of Cook county against the estate of Andrew E. Smythe, deceased. That court, after hearing the evidence, entered an order disallowing the claim. Evans appealed to the circuit court of Cook county, where the case was tried before a jury, and a verdict was rendered in favor of appellee for $82,760.97. Motions for a new trial and in arrest of judgment were respectively overruled by the court, and judgment was rendered upon the verdict. Appellants appealed to the Appellate Court for the First District, where the judgment of the circuit court was affirmed, and they now appeal to this court.

Charles H. Evans, the appellee, was the administrator of the estate of Andrew E. Smythe at the time this claim was filed in the probate court, and that court appointed John T. Richards to defend said estate against this claim. Margaretta M. Smith is the sole heir and distributee of said estate, and joins in the appeal to this court. The claim of appellee, on which he obtained judgment below, is for one-half of the profits realized by deceased under a contract for the construction of a gas plant in the city of Chicago for the Universal Gas Company, of that city. The contract was made on March 14, 1895, between the gas company and Smythe, and provided that the plant should be constructed under the supervision of Evans, appellee, as engineer, who should pass upon the sufficiency of the work done under the contract. Smythe was to receive $1,177,000 for the work, which was to be completed by March 5, 1897, and payments were to be made from time to time upon the certificate of Evans to the amount of 85 per cent. of the value of the work done, 15 per cent. of the contract price to be withheld until the work was completed and accepted. On October 14, 1895, Smythe assigned the contract for the construction of this gas plant to the Continental Contract Company, a corporation with a capital stock of $100,000, of which Smythe owned all but $200 of the stock. Afterwards C. H. Randle acquired one-half of all the stock, and Smythe continued the owner of one-half. Evans superintended the construction of the gas plant, inspected material, received and passed on the bids of subcontractors, and ordered payments by the Continental Contract Company to the subcontractors as the work progressed, and contends that Smythe agreed to pay him one-half of the profits received by him (Smythe) from the construction of the gas plant for rendering these services, as Evans was an expert in the business of constructing plants of this character, while Smythe was not specially skilled in such work. The evidence also tends to prove that Smythe, or the Continental Contract Company, had a superintendent of construction by the name of Tibbets, whose duty it was to see that the work was properly constructed by the subcontractors, and, in general, to perform for the Continental Contract Company the duties of superintendent. Appellants contend that any supervision exercised by the claimant was in his capacity as engineer for the gas company. According to appellee, the net profits to the Continental Contract Company from this work amounted to $451,043.90, of which Smythe, as owner of one-half the capital stock of the company, was entitled to $225,521.95, and Evans, in his claim filed below, gives Smythe credit for $30,000 paid to him on account.

Appellants offered no evidence except the inventory and report of appellee, as administrator, and two orders for partial distribution, entered by the probate court of Cook county in Smythe's estate, to all of which objections were sustained. Appellants, both at the close of the evidence for the claimant and at the conclusion of all the evidence, asked the court to instruct the jury to find the issues for the estate, but the court refused to give such instructions. Appellants deny the existence of any contract between appellee and Smythe, but aver that, if one existed, as claimed by appellee, the same was contrary to public policy, and void, because inconsistent with the duties which appellee, in his capacity as engineer for the Universal Gas Company, owed to that corporation. Appellants also insist that there is no evidence showing that Smythe received any profits from the work; that the circuit court erred in refusing to give instructions numbered 7, 8, 9, and 10, offered by appellants, and in giving instruction numbered 2 for appellee, and that the court erred in refusing to admit in evidence the inventory, report, and orders for partial distribution, offered by appellants.

SCOTT, J. (after stating the facts).

A contract for the erection of a gas plant was made between the Universal Gas Company, as party of the first part, and Andrew E. Smythe, as party of the second part, and provides that it is ‘to be built and constructed under the supervision of C. H. Evans, engineer, and, in case of his death, removal, or disability, then under such other engineer as may be designated by said party of the first part, which said engineer shall pass upon the sufficiency of the work done under said contract. The workmanship and material to be first-class in all respects, and the work to be done to the satisfaction and acceptance of the engineer in charge.’ And one of the questions in the case is, did Evans act as engineer for the gas company, as contemplated by the parties to the foregoing contract at the time it was executed?

It appears from the testimony of Joseph Dawson, a civil engineer and draftsman, that in 1895 and 1896 he was employed by the Universal Gas Company in preparing the detail plans for the erection of this plant, that Evans gave him instructions in reference to this work, and that Evans was engineer of the Universal Gas Company and in the employ of that company while the witness was there. The evidence therefore at least tends to show that Charles H. Evans, the claimant, was the engineer in charge of the work for the Universal Gas Company, whose duty it was to pass upon the sufficiency of the work done under the contract, and who had to be satisfied by Smythe that the workmanship and material were first-class in all respects. If, as he now contends, he was also in the employ of Smythe, the contractor, and entitled to receive from Smythe one-half of the profits realized by the latter from the contract, then he was in a position where absolute loyalty to the interests of his employer, the Universal Gas Company, would bring him in conflict with his own interests as the employé of Smythe, because in the latter capacity it would advance his own interests to accept, as a compliance with the contract, workmanship and material of a cheaper grade than first-class, for the reason that Smythe's profits, and consequently his own compensation, would thereby be increased.

In the case of Gilman, Clinton & Spring-field Railroad Co. v. Kelly, 77 Ill. 426, where a bill was filed by a stockholder in the railroad company charging that certain directors thereof had become stockholders in another corporation, the Morgan Improvement Company, and that the railroad company had made a contract for the construction of certain work with the improvement company under which work had been done, and asking that the contract be declared fraudulent in law and void, and requiring the directors who were stockholders of the improvement company to surrender to the railroad company the profits they had realized from the construction contract, this court held that the relief sought should be granted. It will be perceived that the case closely approaches the case at bar. Here the claimant was an agent of the corporation, as the evidence tends to show, while in the Kelly Case the persons charged with improper conduct were directors of the corporation. It is not believed that this is an essential difference. One man cannot serve two masters with reference to any matter where their interests are adverse, and it matters not, where one of those masters be a corporation, whether the servant be a director or agent. His duty to his master is none the less imperative.

In the case to which we have just referred we used this language (page 434): ‘It may be added, the rule stands on the obligation which a party owes to himself and his principal that forbids him to assume a position which would ordinarily excite a conflict between his individual interest and a faithful discharge of his fiduciary duties. It operates to restrain all agents or trustees, public or private. The inquiry is not whether the contract the trustee has made is the best that could have been made for the cestui que trust, or whether it is fraudulent in fact. So strictly is this principle adhered to that no question is allowed to be raised as to fairness of the contract. The principle has a broader scope. The law has absolutely inhibited the agent or trustee from placing himself in a position where his own private interests would naturally tend to make him neglectful of his obligations to his principal, or where his position would afford him an opportunity to speculate in the trust property.’ In Aberdeen Railway Co. v. Blaikie, 1 MacQueen (H. L.) 461, it is said: ‘A corporate body can only act by agents, and it is, of course, the...