Town of Hartley v. Floete Lumber Co.
| Decision Date | 20 March 1919 |
| Docket Number | 32576 |
| Citation | 171 N.W. 183,185 Iowa 861 |
| Parties | TOWN OF HARTLEY, Appellee, v. FLOETE LUMBER COMPANY et al., Appellants |
| Court | Iowa Supreme Court |
Appeal from O'Brien District Court.--WILLIAM HUTCHINSON, Judge.
ACTION to cancel certain warrants issued by the plaintiff city to the defendant company. Decree as prayed. Opinion states the facts.--Reversed and remanded.
Reversed and remanded.
Heald & Cook and J. T. Conn, for appellants.
T. E Diamond, for appellee.
The plaintiff brings this action in equity, praying the cancellation of certain warrants issued by it to the defendant company. Its theory is that the warrants are void, and it predicates this on substantially these facts:
That the defendant the Floete Lumber Company is, and, at the time of the matters complained of, was, a private corporation, with one of its branch offices and yards in the plaintiff town; that the other defendant, Grotewohl, is and was, at all times covered by the transactions herein complained of, a stockholder and member of the board of directors of the defendant company, and its local manager at the town of Hartley, and also a duly elected, qualified, and acting councilman of plaintiff city; that, while so a member of the city council, and sustaining the relationship hereinbefore indicated to the defendant company, defendant sold and delivered to the town of Hartley, through Grotewohl, certain goods, wares, and merchandise, and in payment therefor, issued the warrants in question.
It appears that Grotewohl, as a member of the city council, voted for the purchase of the material, for the allowance of the bills, when presented, and for the issuance of the warrants involved. At the time this action was commenced, these warrants were all in the hands of the defendant company, and unpaid.
Grotewohl's term of office expired on the 3d day of April, 1916, and a new council was elected. On the 7th day of April, 1916, plaintiff, through its new council, served notice on the defendants that the warrants would not be paid, and instructed the treasurer not to pay any of the warrants. It further appears in the stipulation of facts that the city, through its council, had full knowledge of the purchase, when made, and the relationship of the parties, and the use to which the things purchased were put, and had this knowledge at the time the bills were approved and allowed, and the warrants ordered. It further appears that the reasonable market value of the goods purchased and received by the plaintiff is represented by the warrants issued, and that some of the goods received have been used by the city, and cannot be returned, while other of the material is of such a character and so used that it is impossible to return it without dismantling or tearing down or destroying the building or structure into which it has been incorporated. It further appears that the property was a proper subject of purchase, and was bought and used for the benefit of its citizens.
As we said before, this action is brought to cancel the warrants issued, on the theory that they are void because of the relationship of Grotewohl to the two contracting parties, and because of his interest in the subject-matter of the contract.
The defendant company, in a cross-petition, alleges that the goods were sold at the fair market value, were received and used by the plaintiff, and are still retained by it, and were of value to the plaintiff. It prays that, if the court finds that the warrants are void because of the facts alleged, defendant have judgment for the actual value of the property received and retained and used by the plaintiff, without profit. It is conceded by the plaintiff that the profit to defendant did not exceed 20 per cent, and that, after deducting $ 445.84 from the total amount of the bills as audited and approved by the council, and as represented by the warrants, the balance would represent the actual cost of the merchandise, without profit of any kind to the defendant. The court, however, found that the warrants were void, ordered them canceled, and enjoined the plaintiff from paying to the defendant any sum whatever for the material furnished; and from this decree, the defendant appeals.
Section 668 of the Code of 1897, Subdivision 14, provides:
"No member of any council shall, during the time for which he has been elected, be appointed to any municipal office which shall be created, or the emoluments of which shall be increased, during the term for which he shall have been elected; nor shall he be interested, directly or indirectly, in any contract or job for work, or the profits thereof, or services to be performed for the corporation."
We have had occasion to construe this statute in Bay v Davidson, 133 Iowa 688, at page 690, 111 N.W. 25, and said that the purpose of the statute was to prevent councilmen, directly or indirectly, from making profit out of their relationship with the city; that the compensation provided for was the only compensation which councilmen were entitled to receive; and that the compensation cannot be increased through profits made, directly or indirectly, in the sale of goods or merchandise to the city. It was held that contracts made by a councilman, acting for the city, with himself, or with corporations in which he was pecuniarily interested, were against public policy, and not enforceable against the city, because of the temptation it placed before these officers to profit in double dealing. The thought running through the cases seems to be that one intrusted with the business of others cannot be allowed to make such business an object of pecuniary profit to himself. Nothing can be added to what has been already said by this court on this question. Such contracts are voidable at common law. This...
To continue reading
Request your trial