Tuscan v. Smith

• Decision Date: 23 January 1931
• Citation: Tuscan v. Smith, 130 Me. 36, 153 A. 289 (Me. 1931)
• Parties: TUSCAN et al. v. SMITH et al.
• Court: Maine Supreme Court

153 A. 289

TUSCAN et al.

v. SMITH et al.

Supreme Judicial Court of Maine.

Jan. 23, 1931.

Appeal from Supreme Judicial Court, Somerset County.

Suit by Frederick F. Tuscan and others against Clyde H. Smith and others. From an adverse decree, named defendant and certain other defendants appeal.

Decree modified, and appeal dismissed.

Argued before PATTANGALL, C. J., and DUNN, STURGIS, BARNES, and THAXTER, JJ.

Merrill & Merrill, of Skowhegan, Belleau & Belleau, of Lewiston, and Geo. C. Wing, Jr., of Auburn, for appellants.

Harry R. Coolidge, of Pittsfield, for appellees.

Gower & Eames, of Skowhegan, for Blin W. Page.

THAXTER, J.

This case is before this court on appeal by certain defendants from a decree of a sitting justice sustaining the plaintiffs' bill in equity.

The bill is brought by ten taxable inhabitants of the town of Skowhegan seeking cancellation of a lease given by the town to the defendant Myron E. Smith, and by him assigned to the defendant Priscilla Theatres, Inc., and among other prayers asks for an injunction against the lessee or his assignee taking possession of the demised premises. Joined as defendants with the lessee Myron E. Smith are his assignee, Priscilla Theatres, Inc., J. Nazaire Theriault, who received an assignment of the lease from the theatre company as security for his indorsement on certain notes, Clyde H. Smith, a brother of Myron and chairman of the selectmen of the town of Skowhegan, Frances Smith, wife of Myron, the remaining two selectmen of the town, and the town itself. The claim of the bill as amended is that a lease dated October 19, 1929, of a portion of the municipal building to Myron E. Smith is void, because knowingly made for a less rental than could have been obtained from other parties and because Clyde H. Smith, one of the selectmen, was pecuniarily interested in the granting of the lease and in the assignment of it. The bill sets forth the following circumstances as evidence of such interest, that Clyde H. Smith was a part owner with his brother in the picture business to be conducted on the premises, that he was liable on guaranties given by his brother to one from whom his brother had purchased an outstanding interest in the business, and that he was a creditor of his brother in a substantial amount. The bill charges that the assignees of the lease had knowledge of these facts. The answers of the various defendants deny these allegations with the exception that they admit the guarantee and an indebtedness of Myron E. Smith to his brother, which was paid by notes received from Priscilla Theatres, Inc., as part of the price for the assignment of the lease and the sale of the business. The answers also set forth that the form of the lease had the approval of the voters of the town, that a request for bids was suitably advertised, and that only one bid was received, that of Myron E. Smith and Rexford St. Ledger.

The evidence shows the following facts: Prior to March, 1929, Myron E. Smith and Grace St. Ledger were the lessees of a portion of the municipal building of the town of Skowhegan. In the leased premises they operated a moving picture business. This lease expired February 20, 1930. At the annual town meeting in March, 1929, the town ordered its selectmen to prepare a blank form for a new lease and submit it to the town for approval, and directed the selectmen to award the lease to local parties if they would meet the terms of outsiders. On June 8th this draft of a lease was submitted to the town voters and approved. It provided for the letting of that part of the municipal building used as a moving picture theater, for a term of ten years at a rental of $12 a year. The lessee was, however, to heat and light the whole building, and to furnish janitor service for it and for the surrounding grounds. The lease provided in considerable detail how this work should be done. All of these services were to be performed to the satisfaction of the selectmen of the town. In addition, the standard and quality of the pictures to be shown were subject to the approval of a board of five censors to be chosen by the selectmen. There were numerous other covenants to be performed by the lessee, which it is unnecessary to mention. Proposals for bids were duly published and but one bid was received, a joint bid from Myron E. Smith and Rexford St. Ledger, the son of Grace St. Ledger, lessee with Myron of the existing lease. The new lease was to run for ten years from February 20, 1930, the date of the expiration of the old lease. For some reason not satisfactorily explained the new lease was not actually executed till October 19th, on which day also Rexford St. Ledger, with the approval of the selectmen, assigned his interest under the bid to Myron E. Smith. That very day negotiations started between Myron E. Smith and Priscilla Theatres, Inc., for the purchase by the latter of Myron's business. Ten days later Myron bought out Mrs. St. Ledger's interest in the balance of the old lease and her interest in the business, and gave her an agreement to save her harmless on any partnership debts. Clyde Smith guaranteed his brother's performance of this obligation. The negotiations were finally closed with Priscilla Theatres, Inc., about the middle of November. The purchaser received from Myron E. Smith an assignment of the balance of the old lease, an assignment of the new lease which was approved by Clyde Smith and Joseph Butler, two of the three selectmen, a bill of sale of certain of the equipment, and an assignment of Myron Smith's interest in certain motion picture contracts. For this $10,000 was paid, $2,000 in cash and the balance by four notes payable in one, two, three, and four years, with interest at 5 per cent. These notes were indorsed by Mr. Theriault, the treasurer of the purchasing company. The evidence does not show that Clyde Smith was an owner in the business, but at the time of this sale, and for a long period of time prior thereto, Myron Smith had been indebted to his brother in the sum of $4,000, and shortly after the sale this indebtedness was discharged by Myron turning over to Clyde notes of the Priscilla Theatres, Inc., to the amount of $3,000. One of the notes was split to enable this to be done. It is important to bear in mind that Clyde Smith took an important part in the negotiations between his brother and the purchaser. His brother was nervous and in ill health. Clyde advised him as the deal progressed. When misunderstandings arose, it was on Clyde's suggestion that his brother gave in. Clyde insisted on the indorsement of the notes. He was present at the first interview October 19th between his brother and Mr. Dam, the representative of the purchaser, and was a participant in the discussion of the terms of the sale. It is a fair inference from the evidence that he was his brother's confidant and adviser in business matters. Clyde Smith had been for many years a member of the board of selectmen of the town of Skowhegan, and at the time of these negotiations and the filing of the bill in this case was chairman of the board. The question before this court now is whether on these facts the sitting justice was warranted in sustaining the plaintiffs' bill, and in holding void the lease given by the town to Myron E. Smith. A question of jurisdiction should be settled at the outset.

At the time that Maine became a separate state in 1820 the Supreme Judicial Court was not granted general equity powers. The first laws on the subject passed in 1821 followed the Massachusetts acts, and gave jurisdiction in certain specified cases. From time to time this was enlarged, but this court has always held that it had no equity powers, except in so far as they may have been given by legislative enactment. Among such statutory extensions of jurisdiction were acts giving a remedy in equity in certain cases involving unauthorized doings by cities and towns. These are found in the Revised Statutes 1916, c. 4, §§ 42, 43, 44, and chapter 82, § 6, par. 13.

Chapter 82, § 6, subd. 13, reads as follows: "XIII. When counties, cities, towns, school districts, village or other public corporations, for a purpose not authorized by law, vote to pledge their credit or to raise money by taxation or to exempt property therefrom, or to pay money from their treasury, or if any of their officers or agents attempt to pay out such money for such purpose, the court shall have equity jurisdiction on petition or application of not less than ten taxable inhabitants thereof, briefly setting forth the cause of complaint." This provision was first enacted in 1864, c. 239, Public Laws 1864, and has come down to us today in practically its original language, with the exception that the words "or to exempt property therefrom" were not included in the original act These first appear in the revision of the statutes of 1883.

Chapter 4, §§ 42, 43 and 44, Rev. Stat. 1916, read as follows:

"Sec. 42. Town officers not to act when pecuniarily interested. R. S. c. 4, § 38. No member of a city government or selectmen of a town, shall in either board of such government, or in any board of selectmen, vote on any question in which he is pecuniarily interested directly or indirectly, and in which his vote may be decisive; and no action of such government or board taken by means of such vote, is legal.

"Sec. 43. Interests in municipal contracts prohibited. R. S. c. 4, § 39. No member of a city government shall be interested, directly or indirectly, in any contract entered into by such government while he is a member thereof; and contracts made in violation hereof are void.

"Sec. 44. Enforcement of §§ 42 and 43. R. S. c. 4, § 40. The supreme judicial court in equity, by writ of injunction or otherwise, may restrain proceedings in any town in violation of the two preceding sections, upon application of ten or more taxable citizens."

These provisions were originally passed in 1868. Chapter 162, Public...