Grady v. City of Livingston , 115 Mont. 47 ( 1943 )

By section 444, Revised Codes, public officers, including city officers, are prohibited from being interested in any contract made by them in their official capacity. By section 445, they are prohibited from being purchasers at any sale or vendors at any purchase made by them in their official capacity. By section 5069, Revised Codes, all city officers are prohibited from being interested in the profits of any contract made by the city council while they are or were in office.

By section 10827, Revised Codes, the violation by a public officer of any of the prohibitions declared in the above mentioned sections is made a public offense for which he may be punished by fine or imprisonment, coupled with disqualification from holding public office.

The law in these four sections is a prohibition directed against the officers personally. As to the transactions and the property rights resulting, the only statutory provision declaring the effect thereon of the law violation is in section 446, Revised Codes, which says that contracts made in violation of any of the provisions of sections 444 and 445 may be avoided at the instance of any party except the officers interested therein. So far as we have statutory law, the question before us then narrows down to the meaning of the provision for avoiding the contracts. The provision is that the contracts "may be avoided."

Whatever might have been done to avoid any contracts made in the transactions under consideration — that, it seems, would necessarily have to be done in each instance before the transaction was in every way completed, or at least while the parties could still be put in statu quo ante.

Here, all of these transactions were fully completed. The goods were bought and delivered; paid for and used. There was no more any contract. The contract was done. There could be no refusal to perform nor any injunction against performance. The relation between the parties had gone beyond the point where there was any contract to avoid.

With no provision as to the contract rights resulting other than that in section 446, there is no statutory authority for recovery in these suits; nor do we find any decisions of our own court declaring a policy which entitles plaintiffs to recover. On the contrary, the decisions, wherein the principle here involved has been dealt with, all point to a policy opposed to the right of recovery under the facts and circumstances here relied on. (Morse v. Granite County, 19 Mont. 450, 48 P. 745; Hicks v. Stillwater County, 84 Mont. 38, 274 P. 296; Hill County v. Shaw Borden Co., 9 Cir., 225 Fed. 475; Smith EngineeringCo. v. Rice, 9 Cir., 102 F.2d 492; First Nat. Bank ofNashua v. Valley County, 112 Mont. 18, 113 P.2d 783.)

The rule adopted and adhered to in these decisions is that the unlawful personal interest of an officer of a municipal corporation in the subject matter of a transaction which he handles in his official capacity does not of itself relieve the municipality from its obligations under the circumstances arising. The municipality may refuse to be bound by the transaction and may avoid the contract entered into. But if it accepts and retains the fruits of the transaction, it must pay the value thereof. It cannot relieve itself of the obligation alone because of the unlawful personal interest of its officer.

Applying that rule to the cases before us, plaintiffs cannot recover. I fully concur in the opinion of Mr. Justice Morris sustaining the judgments of the lower court.