Summary
In Capital Gas Co. v. Young, 109 Cal. 140, the court said: "Under section 629 of the Civil Code the respondent was bound, upon proper demand, to furnish gas to the city.... Under the operation of this law the gas company was not a free agent with power to contract or refuse to do so, but it became its duty, upon demand, to furnish gas to the city irrespective of the status of its president.
Summary of this case from Gallagher v. Equitable Gas Light Co.Opinion
Department One
Appeal from a judgment of the Superior Court of Sacramento County. A. P. Catlin, Judge.
COUNSEL:
J. Frank Brown, and Clinton L. White, for Appellant.
A. L. Hart, for Respondent.
JUDGES: Searls, C. Vanclief, C., and Haynes, C., concurred. Garoutte, J., Van Fleet, J., Harrison, J.
OPINION
SEARLS, Judge
[41 P. 870] The Capital Gas Company, a corporation organized and existing under the laws of the state of California, is, and for more than twelve years last past has been, engaged in the business of furnishing gas to the residents of the city of Sacramento (a municipal corporation), and to consumers generally, for profit, and has had shares of stock issued to and held by divers persons, and C. H. Cummings is, and for more than one year last past has been, the duly appointed and acting secretary of said corporation.
The said corporation has, during a period of more than twelve years last past, been engaged in said business under and pursuant to certain franchises duly granted to it by said city of Sacramento.
On the eleventh day of January, 1882, the board of trustees of said Capital Gas Company, by resolution regularly passed, fixed the price to be paid by consumers thereof at three dollars for each thousand cubic feet.
J. D. Young, the appellant herein, is, and for more than three years last past has been, the duly elected and qualified auditor of said city of Sacramento, and under the provisions of the charter thereof, duly adopted, it is the duty of said auditor to draw and sign all warrants upon the treasury for claims against said city which have been allowed by the board of trustees thereof.
The fire department is, and for more than one year prior to 1894 was, one of the departments of the municipal government of the city of Sacramento.
At all the times herein mentioned B. U. Steinman was and still is the holder and owner of stock in said Capital Gas Company, and was and still is the president of said company, and since the first Monday in January, 1894, has been and still is the duly elected and acting mayor of said city of Sacramento.
Between the first day of February, 1894, and the first day of March, 1894, the fire department of the city of Sacramento used and consumed eight thousand six hundred cubic feet of gas, furnished and distributed by the Capital Gas Company, which gas, according to the rate fixed as aforesaid, was of the value of twenty-five dollars and eighty cents, and thereafter, and on the 1st of March, 1894, the said gas company presented its bill therefor in said amount, duly itemized and verified, to the board of trustees of said city, which bill was allowed by said board for said sum of twenty-five dollars and eighty cents, and presented to the auditor aforesaid, who rejected the same and returned it to the board as provided by the charter.
Thereafter the same bill was again allowed and approved by the board of trustees and by B. U. Steinman, the mayor, in due form, and was again presented to the auditor, who refused to audit the same or to draw his warrant therefor on the treasurer of said city in favor of the said gas company.
Said sum of twenty-five dollars and eighty cents is still due and owing from the said city to the said gas company.
The gas so furnished was not furnished under any express contract, nor was it furnished pursuant to any contract entered into before the election of said mayor, except that it was so furnished pursuant to the franchises of the said gas company and the law applicable to said gas company.
Section 211 of the charter of the city of Sacramento provides as follows: "Sec. 211. No member of the board of trustees, and no officer of or employee of the city, shall be or become directly or indirectly interested in or with the performance of any contract, work, or business, or in the sale of any article, the expense, price, or consideration of which is payable from the city treasury, or in the purchase or lease of any real estate or property belonging to or taken by the city, or which shall be sold for taxes or assessments, or by virtue of legal process at the suit of the city. Any member of the board or any officer or employee of this city violating the provisions of this section, or who shall be directly or indirectly interested in any franchise, right, or privilege granted by the city while he is such member, officer, or employee, unless the same shall devolve upon him by law, shall forfeit his office, and be forever disqualified from holding any position in the service of the city; and all contracts made, or rights or franchises granted, in violation of this section shall be absolutely void."
Upon the facts as found by the court, of which the foregoing is a condensed statement, the court below adjudged that an alternative writ of mandate theretofore issued in the cause be made peremptory, requiring the appellant herein as auditor to issue his warrant upon the treasury of the city of Sacramento, and upon the proper fund therein for the amount of the demand, viz., for twenty-five dollars and eighty cents.
The defendant, auditor as aforesaid, appeals from the judgment, and the cause comes up on the judgment-roll. The officers of a municipal corporation, like those of private corporations, are agents of the corporate body. It is a cardinal doctrine of the law of agency that "whenever an agent is invested with authority to use any discretion in the exercise of the powers conferred upon him, it is an implied condition that this discretion shall be used in good faith for the benefit of the principal, and in accordance with the true purpose of the agent's appointment.
" To this extent every agency which is not a purely ministerial one involves a fiduciary relation between the parties." (Morawetz on Private Corporations, sec. 516.)
It is in consonance with this principle that officers of a corporation may not, under any circumstances, use their official position for their own benefit, or for the benefit of any one except [41 P. 871] the corporation itself, and they may not represent the corporation in any contract or transaction in which they are personally interested in obtaining an advantage at the expense of the corporation.
In such cases it is said the corporation would not have the benefit of their unbiased judgment, as self-interest would prompt them to prefer their own advantage to that of the company. (San Diego v. San Diego etc. R. R. Co ., 44 Cal. 106; Shakespear v. Smith , 77 Cal. 638; 11 Am. St. Rep. 327; Finch v. Riverside etc. Ry. Co ., 87 Cal. 597; Wickersham v. Crittenden , 93 Cal. 29; Capron v. Hitchcock , 98 Cal. 427; Dillon on Municipal Corporations, sec. 444.)
The rule embodied in the foregoing decisions, and which has the support of a host of others which might be mentioned, is not an arbitrary one. In other words it is founded in reason, and is not to be indiscriminately applied, irrespective of the circumstances of the case. (Morawetz on Private Corporations, sec. 521.)
It would seem that the circumstances of the present case bring it within the exceptions for the following reasons:
1. The authority to transact the business of the municipal corporation of the city of Sacramento, to procure supplies therefor, and to audit and allow claims against the city, is vested in the board of trustees, and B. U. Steinman, as mayor of the city, has not, so far as appears from the record, any authority in the premises.
2. The gas furnished to the city was not supplied under or pursuant to any express contract with the respondent corporation of which Steinman is president, and the right to recover the reasonable value thereof is based upon the implied promise which the law raises.
3. Under section 629 of the Civil Code the respondent was bound, upon proper demand, to furnish gas to the city, and upon refusal so to do, was liable to a penalty of fifty dollars as liquidated damages, and five dollars a day as liquidated damages for each day such refusal or neglect continues thereafter.
Under the operation of this law the gas company was not a free agent with power to contract or refuse to do so, but it became its duty, upon demand, to furnish gas to the city, irrespective of the status of its president.
This duty to furnish gas to the city devolved upon the respondent, not by virtue of any contract, but by operation of law, and hence the laws governing ordinary contracts resting in the volition of the parties thereto has no application.
Where the law affixes a penalty for the nonperformance of an act, its performance should not be adjudged illegal, or subject the party performing to the implication of having violated a duty.
Had the city of Sacramento been in need of the land of its mayor pursuant to some public use, and had it by proceedings for the condemnation thereof, under the law of eminent domain, succeeded to the title, the proceeding would have been so far an adversary one that there would have been no liability on the part of such mayor for a violation of section 211 of the city charter hereinbefore quoted.
The case at bar does not differ essentially in principle from the one supposed. Section 211 of the city charter, which inhibits its officers from being interested in any contracts or sales to the city involving the payment of money from its treasury, or from being interested in any franchise, right, or privilege granted by the city while they are in office, is, except as to the penalty imposed thereby, in substance a declaration of the common law as it previously existed, and is founded in wisdom and justice.
It is intended as a shield to the city against the selfishness and greed of officials, but was not intended, and may not be used, as a medium by which the city can take the property of others without their consent, under the form of law, and then refuse to pay therefor its reasonable worth, because an officer of the city is interested in such property.
We hold that section 211 of the city charter had no application to a case like the present, where the gas company is required by positive law to furnish gas to the city upon demand, and having furnished the commodity, has presented its bill for the reasonable value thereof, although the mayor of the city owns stock in the gas company and is president thereof.
The city, having received and used the gas pursuant to a right which it enjoyed independent of the volition of respondent, is in equity and conscience bound to pay the reasonable value thereof.
The judgment appealed from should be affirmed.
For the reasons given in the foregoing opinion the judgment appealed from is affirmed.