HARDY v. MAYOR AND COUNCIL OF GAINESVILLE

Supreme Court of Georgia1904-11-12

121 Ga. 327

Summary · law.co

Holding. The contract between Gainesville and the publishing company was void because a city council member's stock ownership in the contractor violated statutory and charter prohibitions against municipal officers holding any interest in city-funded work contracts. The judgment refusing the injunction was reversed, and the city must be enjoined from performing under the illegal contract.

In January 1904, the City of Gainesville entered into a printing contract with a private publishing company at a time when one city council member held stock in that company. A taxpayer sought to enjoin performance under the contract, arguing it was void. The trial court refused to grant the injunction. The court held that the contract violated statutory provisions and the city's charter prohibiting municipal officers from having any interest, direct or indirect, in contracts for work paid from the city treasury. Ownership of stock in a private contractor constitutes such a prohibited interest, making the contract void as contrary to public policy. The court rejected the argument that the contract became valid when the officer later transferred his stock to another person, since an illegal contract cannot be cured by subsequent changes in ownership.

Summary generated by law.co from the public-domain opinion. The opinion text itself is public domain.

Key issues

Whether a city contract is void when a municipal officer holds stock in the contracting private corporation
Whether a void contract can be ratified or cured by the officer's subsequent transfer of stock
Scope of statutory prohibitions on municipal officers' conflicts of interest in city contracts

Procedural posture

A taxpayer petitioned in equity for an injunction to restrain the city from performing under a printing contract, the trial court denied the injunction, and the taxpayer appealed.

Authorities cited

No cited authorities resolved to law.co cases yet.

Opinion · public domain

majority opinion

Simmons, C. J.

In January, 1904, the Mayor and Council of the City of Gainesville awarded to a publishing company, a private corporation, the contract for the printing for the city for the year 1904. At the time this was done, one of the members of the city council owned some stock in the publishing company. This stock he disposed of and had transferred to another in May of the same year. Subsequently a citizen and taxpayer brought an equitable petition to restrain the municipal authorities from giving any work to. the publishing company under the contract above mentioned, the petitioner claiming that the contract was void. On the interlocutory hearing the judge refused the injunction prayed, and the petitioner excepted.

We think that the contract entered into between the city and the publishing company was void. It was contrary to public policy as declared in the code, and in the charter of the City of Gainesville. While, generally, “a contract otherwise fair is not rendered void by the fact that the contracting parties consist of corporations having the same persons qr officers in each ” (Civil Code, § 1857), the rule is different where the contract is for the performance of work for which payment is to be made out of the city treasury and where one of the city’s officers is interested in the contract. Not .only does our Political Code (§ 751) make it illegal for a member of a city council to vote upon any question, brought before the council, in which he is personally interested, but it provides (§ 709): “No person holding office under any municipal incorporation shall, during the time for which he was elected or appointed, be capable of contracting with such corporation for the performance of any work which is to be paid for out of the treasury, nor shall any such person be capable of holding or having any interest in such contract, either by himself or by another, directly or indirectly.” This last section is substantially incorporatedin the provisions of the charter of the City of Gaines-ville. Acts Í877, p. 169. A stockholder in a private corporation clearly has an interest in its contracts; and if the city can not make the contract with the officer himself, it can not make it with a corporation in which such officer is a stockholder. Such contracts as come within the provisions of section 709, that is, those which are for the performance of work for which payment is to be made out of the city treasury, are by it forbidden and made contrary to public policy. Such contracts are, therefore, void. Hence we think that the contract involved in the present case was illegal and void.

The contract having been illegal and void at the time of its execution, it could not become legalized by the subesquent transfer of the stock óf the publishing company. If the officer of the city then ceased to have any interest in the publishing company’s business and contracts, we see no reason why such company and the city could not have entered into a new contract; but we are clear that they could not properly treat‘the old illegal contract as having become valid by reason of the transfer of the stock. The city appears to be awarding its work to the company under the illegal contract of January, 1904, and the judge should have enjoined it from so doing.

Judgment reversed.

All the Justices concur.