Opinion
No. 35261.
March 22, 1943.
1. CONTRACTS.
A contract between a taxpayer and one employed as an auditor in the office of State Tax Commissioner, by which, in consideration of a percentage of amounts recovered, auditor agreed to assist taxpayer in the recovery of taxes illegally paid, was contrary to "public policy" and void (Laws 1938, ch. 113, sec. 16).
2. CONTRACTS.
Where auditor employed in office of State Tax Commissioner contracted to assist taxpayer in recovering taxes illegally paid, auditor was not entitled to recover on contract on ground that he did the state no wrong because taxes were wrongfully collected, since whether taxes were collectible was for decision by the officer charged with tax collection subject to approval of the court (Laws 1938, ch. 113, sec. 16).
3. CONTRACTS.
Contracts, which tend to be injurious to the public or against the public good, are illegal and void even though actual injury does not result therefrom.
4. CONTRACTS.
Auditor employed in office of State Tax Commissioner, who contracted to assist taxpayer in recovering taxes wrongfully paid, could not contend that contract was not void as against public policy because his duties were to assist in collection of taxes, not in the refunding of taxes, where he was required by statute to perform such duties as may be required by the commissioner, which included the duty to assist in the auditing of claims for refund (Laws 1938, ch. 113, secs. 2-f, 16; Laws 1940, ch. 81, sec. 2; Laws 1942, ch. 11, sec. 2).
5. CONTRACTS.
That a contract which was void as against public policy had been fully performed did not entitle a party to recover thereon.
APPEAL from the circuit court Hinds county, HON. J.F. BARBOUR, Judge.
Watkins Eager, of Jackson, for appellant.
Courts will not give relief to either party to a contract which is illegal or violates the public policy of the state, whether executed or executory.
Gilliam v. Brown, 43 Miss. 641; Woodson v. Hopkins, 85 Miss. 171, 27 So. 1000; Whelchel v. Stennett, 192 Miss. 241, 5 So.2d 418.
The circuit judge held that while he could not approve the conduct of the appellee as being above criticism, the contract was not prohibited by any statute, and he, therefore, did not regard the same as against the public policy of the state. In this respect the circuit judge, in his interpretation of the source of public policy of the state, committed error. It is very true that the constitution and statutes of the state in a great many and probably most cases are the sources of the public policy of the state. However, it is well settled that the public policy of the state is likewise also to be determined by the decisions of the courts.
Brown v. Staple Cotton Co-op. Ass'n., 132 Miss. 859, 96 So. 849; State v. Hines Lumber Co. et al., 150 Miss. 1, 115 So. 598; Kisner v. Jackson, 159 Miss. 424, 132 So. 90; Gerard v. Metropolitan Life Ins. Co., 167 Miss. 207, 149 So. 793; Illinois Cent. R. Co. v. Harris, 108 Miss. 574, 67 So. 54; Whittington v. Cottam Co., 158 Miss. 847, 130 So. 745; Jones v. McFarland, 178 Miss. 282, 173 So. 296; Yazoo M.V.R. Co. v. Whittington, 191 Miss. 776, 4 So.2d 343; Colgrove v. Lowe, 175 N.E. 569; Kentucky Asso. of Highway Contractors v. Williams, 213 Ky. 167, 280 S.W. 937, 45 A.L.R. 544; Kirshenbaum v. General Outdoor Adv. Co., Inc. (N.Y.), 180 N.E. 245, 84 A.L.R. 645; Atwood v. Sellers (Nebr.), 239 N.W. 629; Pyle v. Kernon (Ore.), 36 P.2d 580; In re Brook's Estate (Pa.), 179 A. 242; Goodyear v. Hamilton (Wash.), 19 P.2d 392; In re Forte, 267 N.Y.S. 603; Wagner v. West Carrollton Publishing Co. (N.C.), 130 S.E. 609; Rockwood v. Brown International Inv. Co. (N.C.), 124 P.2d 612; Krause v. Swanson, 3 N.W.2d 497; Kudach v. Port Washington National Bank, 32 N.Y.S.2d 203; Miller v. Walters, 34 N.Y.S.2d 341; Wever v. Sternad (Ohio), 39 N.E.2d 623; First Federal Savings Bank v. Ansell, 41 N.E.2d 430; Elwood v. Lancaster (Tex.), 157 S.W.2d 973; Hardesty v. Dodge Mfg. Co. (Ind.), 154 N.E. 697; Dougherty v. Burger, 234 N YS. 274; 12 Am. Jur. 668, Sec. 171; 12 Am. Jur. 662, Sec. 167; Am. Jur., "Services," pars. 80, 82.
Harold Cox, of Jackson, for appellee.
The appellee's contract with the appellant contravened no rule of public policy in this state.
Darden v. American Bank Trust Co., 158 Miss. 742, 130 So. 507; Ex parte J.W. Gore, 57 Miss. 251; Fidelity Deposit Co. v. Messer, 112 Miss. 267, 72 So. 1004; Fairly v. Western Union Tel. Co., 73 Miss. 6, 18 So. 796; Independent Linen Service Co. v. Stone, 192 Miss. 832, 6 So.2d 110; Willoughby v. Pope, 101 Miss. 808, 58 So. 705; Norwood Butterfield Co. v. Andrews, 71 Miss. 641, 16 So. 262; Merrill v. Melchior, 30 Miss. 516; Knut v. Nutt, 83 Miss. 365, 35 So. 686, affirmed 200 U.S. 12; Orrell v. Bay Mfg. Co., 87 Miss. 632, 40 So. 429; Draughan v. Fox Corp. (Tenn.), 126 S.W.2d 329; Studley v. Ballard (Mass.), 47 N.E. 1000; Hidalgo County v. Feick (Tex.), 111 S.W.2d 742; Houlton v. Nichol (Wis.), 67 N.W. 715; Barry v. Copen (Mass.), 6 L.R.A. 808; Edmunds v. Bullett (N.J.), 36 A. 774; Rau Rieke v. Boyle Boyle, 68 Ky. 253; Southard v. Boyd, 51 N.Y. 177; Dunlop v. Lebus (Ky.), 65 S.W. 441; Lebus v. Dunlop (Ky.), 80 S.W. 803; Miller v. Anderson, 183 Wis. 163, 196 N.W. 868, 34 A.L.R. 1529; Gierth v. Fidelity Trust Co. (N.J.), 115 A. 397, 18 A.L.R. 976; Kaplan v. Suher (Mass.), 42 A.L.R. 1142; Coyne v. Superior Incinerator Co. of Texas (2 C.C.A.), 80 F.2d 844; Anderson v. Blair (Ala.), 80 So. 31; Baltimore O.S. Ry. Co. v. Voigt, 176 U.S. 498, 20 S.Ct. 385; Code of 1930, Secs. 2348, 3276; 13 C.J. 427-428, Sec. 366; 13 C.J. 435, Sec. 371; 13 C.J. 442, Sec. 378; 57 C.J. 1107, Sec. 1138; 17 C.J.S., Secs. 215, 220; 12 Am. Jur. 670-672, Sec. 172; 43 Am. Jur. 151; 6 R.C.L. 767, Sec. 173; A.L.I., Restatement of the Law, Contracts, Sec. 84, (c); A.L.I., Restatement of the Law, Contracts, Sec. 562; A.L.I., Restatement of the Law, Contracts, 1069, Sec. 563; Mechem on Public Officers, Secs. 375, 376; Williston on Contracts, p. 464, Sec. 132; Greenhood on Public Policy 334.
The public policy of this state is announced by the acts of the legislature and the judicial decisions of the courts of this state, and this contract impinges upon neither of such public acts.
Orrell v. Bay Mfg. Co., 83 Miss. 800, 36 So. 561, appeal dismissed 25 S.Ct. 804; State v. Hines Lbr. Co., 150 Miss. 1, 115 So. 598; Johnson v. State, 154 Miss. 512, 122 So. 529; Vidal v. Girard's Estate, 11 L.Ed. 205; Dunlap v. Dunlap (N.H.), 71 A.L.R. 1055; Howard v. Adams (Cal.), 130 A.L.R. 1003; Hartford Fire Ins. Co. v. Chicago, M. St. P. Ry. Co., 175 U.S. 91, 20 S.Ct. 33; Atlantic Coast Line R. Co. v. Beazley (Fla.), 45 So. 761; Black White Taxicab Co. v. Brown Yellow Taxicab Co., 276 U.S. 518, 48 S.Ct. 404.
The contract in suit has been executed and the appellant retains in its possession at this time all of the fruits of appellee's services in such connection. Under such circumstances, even if the contract were illegal, the appellee is entitled to recover.
Woodson v. Hopkins, 85 Miss. 171, 37 So. 1000; Gilliam v. Brown, 43 Miss. 641; Howe v. Jolly, 68 Miss. 323, 8 So. 513; Andrews v. New Orleans R. Co., 74 Miss. 362, 20 So. 837; Darden v. American Bank Trust Co., supra; Southeastern Express Co. v. Namie, 182 Miss. 447, 181 So. 515; McCall Co. v. Hughes, 102 Miss. 375, 59 So. 794; McCall Co. v. Parsons-May-Oberschmidt Co., 107 Miss. 865, 66 So. 274; Rideout v. Mars, 99 Miss. 199, 54 So. 801; Connolly v. Union Sewer Pipe Co., 184 U.S. 540, 22 S.Ct. 431; 13 C.J. 497, Sec. 441.
Argued orally by W.H. Watkins, for appellant, and by Harold Cox, for appellee.
The appellee sued the appellant on a contract by which the appellee agreed "to assist and direct the said company (the appellant) in the recovery of all monies illegally collected from it as sales tax by the . . . State Tax Commission" for which the appellant agreed to pay the appellee "one-third of all amounts so recovered." The evidence discloses that the appellee, pursuant to this contract, prepared a statement from data furnished him by the appellant of the taxes claimed by the appellant to have been illegally collected from it by the State Tax Commission, accompanied by a written agreement very much like a lawyer's brief, setting forth the reasons why the business conducted by the appellant was not within the provisions of Section 2-f, Chapter 113, Laws of 1938, under which the tax was collected, supported by the citation of many authorities claimed to bear thereon. This document was forwarded to the State Tax Commission by the appellant, with a covering letter which had also been prepared by the appellee. Thereafter, two other letters bearing thereon and prepared by the appellee were mailed to the State Tax Commission by the appellant. The State Tax Commission declined to refund the taxes and the appellant employed an attorney to collect the same by legal proceedings. This attorney having expressed a doubt as to the liability of the state or the State Tax Commission to the appellant for a refund of the taxes, the appellee, at the request of the appellant, had an interview, and discussed the matter, with this attorney, filing with him an additional list of authorities which in his judgment supported the appellant's claim. Thereafter, this attorney, who did not know of the appellee's contract with the appellant, filed a suit in the Circuit Court of Hinds County (Independent Linen Service Co. v. Stone, 192 Miss. 832, 6 So.2d 110) and recovered therein the amount of the taxes claimed by the appellant to have been wrongfully collected from it; and this action by the appellee is to recover from the appellant one-third thereof under his contract with it hereinbefore set forth. The appellee, at and prior to the making of this contract and thereafter until after the termination of the appellant's action against Stone for the recovery of the taxes, was an auditor in the office of the State Tax Commission, having been appointed as such by the Chairman of the State Tax Commission under Section 16, Chapter 113, Laws of 1938, which provides: "The chairman of the state tax commission shall appoint, as needed, such deputies, agents, clerks and stenographers as authorized by law, who shall serve under him, and shall perform such duties as may be required by the commissioner, including the signing of notices, warrants and such other documents as may be specifically designated by the commissioner, not inconsistent with this act, and they are hereby authorized to act for the commissioner as he may prescribe and as provided herein." His salary was $160 per month. At the close of the evidence, the court declined a request by the appellant for a directed verdict, but granted a similar request by the appellee and erred in so doing.
While this contract is not expressly condemned by any statute, it violates the implications of Section 16, Chapter 113, Laws of 1938, and tends to thwart the public purpose of that chapter, which is not only to collect the sales tax imposed, but to enable the state to appropriate the tax to its fiscal needs. The appellee was employed to assist in the accomlishment of that purpose, and when he accepted that employment it became his legal and moral duty to remain loyal to the state, his employer, while that employment remained in force — to do nothing to thwart the purpose for which he was employed to assist in accomplishing. The contract which he here made required him to, and in complying therewith he did, violate this duty. Such contracts public policy forbids the courts to enforce. The appellee attempted to do that which he was without the right to do — to serve two masters with conflicting interest, without the consent of both, Y. M.V.R. Co. v. Whittington, 191 Miss. 776, 4 So.2d 343.
But the appellee says that he did the state no wrong here, for the reason that the appellant's business was not taxable under the statute, and therefore the state had wrongfully collected the tax, and should have refunded it. This question was not for the appellee's decision. Whether the appellant's business was taxable depends on the interpretation given Section 2-f, Chapter 113, Laws of 1938, which question was for decision by the officers charged with the collection of the tax subject, when challenged, to the approval of the courts. Moreover, "Contracts contrary to public policy, that is those which tend to be injurious to the public or against the public good, are illegal and void, even though actual injury does not result therefrom." 17 C.J.S., Contracts, sec. 211; Woodson v. Hopkins, 85 Miss. 171, 37 So. 1000, 38 So. 298, 70 L.R.A. 645, 107 Am. St. Rep. 275. The wisdom of this rule is illustrated here for the evidence discloses that the appellee attempted to induce at least one other taxpayer to enter into a contract for his benefit similar to the one here sued on.
Again the appellee says that his employment by the state was to assist in the collection of taxes and not in the refunding of taxes wrongfully collected, and therefore he violated no duty he owed the Tax Commissioner or the state in making this contract with the appellant. Under Section 16, Chapter 113, Laws of 1938, the appellee was required to "perform such duties as may be required by the commissioner," among which is, if the commissioner so requires, the duty to assist the commissioner in the auditing of claims for a refund of taxes paid. Section 19, Chapter 119, Laws of 1934; Section 2, Chapter 81, Laws of 1940; Section 2, Chapter 11, Laws of 1942. But, aside from and without that the purpose of the appellee's employment by the state, as hereinbefore stated, was to assist the Tax Commissioner in collecting sales and other taxes for the use of the state in meeting its fiscal needs and this purpose may be as effectually thwarted by aiding a taxpayer to recover taxes paid as by aiding him to evade the payment thereof.
If the employees of the State Tax Commission have, and exercise, the right to advise and assist taxpayers in attempting to recover taxes paid by them, the commission would be handicapped in discharging its duties; for it could not be sure of the loyalty of its employees, and could not afford to deal with them confidentially.
Finally, the appellee says that since the contract has been fully performed by him, he is entitled to recover thereon though the contract should be held to be illegal. This contention is negatived by former decisions of this court, among which are Woodson v. Hopkins, supra; Whelchel v. Stennett, 192 Miss. 241, 242, 5 So.2d 418, and by authorities elsewhere. 17 C.J.S., Contracts, sec. 282; 12 Am. Jur. Contracts, Section 213.
The court below should not have granted the appellee's request for a directed verdict but should have granted the appellant's request therefor.
Reversed and judgment here for the appellant.