President & Trustees v. San Diego & Los Angeles Railroad

California Supreme Court Jul 1, 1872 No. No. 3,146Published

Before: Belcher

AI Brief

AI-generated · verify before citing

Holding. A deed executed by a city trustee to a railroad company is void when the trustee holds a fiduciary position in both the city and the railroad company, as the law prohibits a fiduciary from acting where their personal interests conflict with their duties to their principal.

Issues

Whether a city trustee who is also a stockholder and director of a railroad company can validly participate in a board decision to convey city land to that company.
Whether the legislative act authorizing the conveyance of city land granted the trustees sufficient discretion to trigger fiduciary conflict-of-interest prohibitions.

Disposition. reversed and remanded

Quotations verified verbatim against the opinion

“The general principle is, that no man can faithfully serve two masters, whose interests are or may be in conflict. The law, therefore, will not permit one who acts in a fiduciary capacity to deal with himself in his individual capacity.”

Synopsis

Act Authorizing a City to Convey its Lands.—An Act of the Legislature authorizing and empowering the Board in which the corporate authority of a city is vested, to convey to a railroad company “ not to exceed five thousand acres of the land of the city, or such parcels thereof as they may deem advisable, and upon such terms and conditions as they may determine,” even if mandatory, so far as the act of conveyance is concerned, vests the Board with discretionary power as to the quantity to be conveyed, and the terms of the conveyance.

Duty of Officer of a City Intrusted with Conveyance of its Lands.—If an Act of the Legislature, authorizing the Board exercising the corporate authority of a city to convey its lands to a corporation, vests the Board with any discretion in the matter, a member of such Board, who is a stockholder or Director in the corporation, cannot act officially in the Board in relation to the matter, or in making the conveyance, and if he does, and his vote or signature to the deed was requisite to complete the conveyance, the deed will beset aside as a cloud on the title.

Duty of Trustee as to Trust Property.—The Board in which the corporate authority of a city is vested, is intrusted witli its property in a fiduciary capacity, and its members cannot bargain with reference to it, with a corporation in which they hold stock.

Majority of Board May Exercise its Authority.—If an Act of the Legislature authorizes the Board exercising the corporate authority of a city to convey its lands, a majority of the members of such Board may make the conveyance.

By the Court, Belcher, J.: This action is brought for the purpose of having a deed, executed by two of the Trustees of the City of San Diego to the defendant, declared void and canceled as a cloud on the plaintiff’s title.

The deed was made under the supposed authority of an Act of the Legislature, approved April 2d, 1870 (Stats. 1869-70, p. 696), authorizing and empowering the President and Trustees of the City of San Diego to donate and convey to the San Diego and Los Angeles Railroad Company “ not to exceed five thousand acres of the pueblo lands of said city, or such pieces or parcels thereof as they may deem advisable, and upon such terms and conditions as they may determine.”

At the time of the passage of the Act and of the execution of the deed the corporate authority of the city was vested in a Board of three Trustees, composed of McCoy, Estudillo, and Sherman.

On the 5th of May, 1870, and on the last day of the official life of Estudillo and Sherman as members of the Board, the Trustees met, and by the vote of Estudillo and Sherman in the affirmative, and McCoy in the negative, passed the following resolution:

Sesolved, By the President and Trustees, that five thousand acres of land be and is hereby granted to the San Diego and Los Angeles Eailroad Company, as per Act of the Legislature, passed and approved April 2d, 1870, and that a deed be given to the said railroad company upon the conditions of said Act.

PTo land having yet been selected to be conveyed in pursuance of the resolution, and McCoy and Sherman refusing to participate in making the selections—the former because he was opposed to the grant, and the latter on account of his [112]relations with the railroad company—Estadillo, in the office of the Board, proceeded to select ninety different parcels, containing in the aggregate five thousand acres. He and Sherman then, within an hour or an hour and a half after the passage of the resolution, executed, acknowledged, and ■delivered to the railroad company a deed for the land so selected. At this time Sherman was an owner of stock in the railroad company to the amount of ten thousand dollars, and was one of its Directors.

We do not think this deed can be upheld. If, as the Court held in The Napa Valley Railroad Company v. The Board of Supervisors of Napa County, 30 Cal. 435, the words “ authorized and empowered,” as used in the Act, are mandatory, still the command was not to donate and convey five thousand acres, much less any particular five thousand acres, but such pieces or parcels of land, not exceeding in the aggregate five thousand acres, as the' Trustees might deem advisable, and upon such terms and conditions as they might determine to be for the best interest of the city. While they were commanded to act in the premises, it was left to them to determine what and how much land, within the limit named, should be conveyed, and upon what terms. A conveyance of two parcels of ten or five acres each would have met all the requirements of the Act. As the officers of the city, they were commanded to do only what in their judgment would most promote the city’s interests.

President & Trustees v. San Diego & Los Angeles Railroad

AI Brief

Synopsis

More from California Supreme Court

Related research

AI Brief