Board of Education of Oklahoma City v. Cloudman

I agree with much of the legal philosophy of the majority opinion as to discretionary powers of the board of education in operating the schools, but cannot agree that in their discretion they have the power to spend public funds for unauthorized and illegal purposes, and I think as a whole the majority opinion is not justified by the facts shown by the petition which are admitted by the demurrer, and that as a whole it is clearly contrary to the statutes, and to our former decisions.

The majority opinion overlooks the fact that expenditures sued upon here were made in excess of the income and revenue provided for each of the two fiscal years involved. It may be that it is the position of the majority that this fact is unimportant in view of the absence of affirmative allegations of corruption or bad faith. It seems to me, however, that this fact is of great importance. I think it justified and requires the opposite conclusion in the case, but, at least, that it merits specific discussion in the court's opinion.

The specific items of expenditure now involved in this action, or most of them, were directly attacked as being unauthorized by law and illegal. This direct attack was made in the manner authorized by law, by a taxpayer filing his protest and specifying as ground thereof that the appropriation was for an illegal purpose. It is true the protest was not finally decided for some months, but as soon as the matter could be reached in the Court of Tax Review the protest was sustained as to certain items of the appropriation which were held to be illegal. An appeal was prosecuted by protestee, and this court finally adjudicated the illegality of items now involved. In the meantime, and after the protests were filed pointing out specifically the illegal items, the board had gone right along issuing warrants and expending public funds for the protested and illegal items. This action includes warrants issued upon identical items which were protested in due time, held by the Court of Tax Review to be illegal, and held by this court to be illegal. Some of the expenditures were even made upon items after they had been declared illegal by the Court of Tax Review, and while the board was in this court urging, but unsuccessfully, that the Court of Tax Review should be reversed. Now this latter statement does not apply to all of the expenditures here sued upon, but does apply to some of them, and by approving the sustaining of the general demurrer, it seems to me this court deems it wholly unimportant that expenditures were made after protest was filed pointing out specific illegality, and even after first judicial determination of illegality.

If it be true that the board of education is justified in assuming legality of an appropriation after its approval by the excise board, could it still assume an illegal appropriation to be legal after its illegality had been specifically pointed out by a taxpayer's protest? Could it still presume an illegal appropriation to be legal after the Court of Tax Review had solemnly adjudicated its illegality? I think not.

If it be true that illegal expenditures may be recovered only when the officers had knowledge of the illegality, then would those officers not have that knowledge when a tax protest was filed formally stating the illegality? Or when the Court of Tax Review tries the matter and sustains the protest and adjudicates the illegality? I think so.

I am not overlooking the fact that an appeal was taken from the Court of Tax Review, and that the illegality of the items involved was not finally and conclusively adjudged by that court. But I would think that to be unimportant when considering the right of the board to treat the illegal items as being legal, or the right of the board to remain without knowledge of the illegality.

As a matter of law, a municipal appropriation for a wholly unauthorized and illegal purpose is an illegal appropriation from the time it is first made, not merely from and after the time it is finally adjudicated to be illegal.

Even if the board of education thought these appropriations to be legal in the beginning, yet after a taxpayer filed a protest pointing out the specific illegality, common prudence would have directed that the board check the matter before spending further. Likewise, after the Court of Tax Review observed and judicially declared the illegality, the board of education, with but casual regard for the rights of the taxpayers, and some regard for their own duties with respect to public funds, might well have ceased spending on the illegal appropriations. This would have been fair in spite of the fact that the board of education procured an appeal to be taken, or one was taken in the name of the county, where it was sought to reverse the Court of Tax Review.

I do not assert that liability exists as to each of the large number of expenditures here involved, nor do I assert that each of the defendants is liable as claimed in the petition. The petition is not thoroughly well drawn. It is my view, however, that the petition sufficiently alleges the illegal expenditure of public funds. It seeks recovery from the persons who received the funds, as well as from the officers who paid it out. I think the general demurrer should be overruled; that after the various causes of action are properly docketed and the various defenses are asserted, the case should be tried; that upon trial the ultimate liabilities, if any, should be determined. I think in no other way can the law be followed, and the rights of the school district be protected.

It seems to me that under the majority opinion the rights of taxpayers to obtain protection by tax protest have been seriously impaired, if not lost sight of in large measure. The majority opinion emphasizes the fact that all these expenditures were made prior to the final determination of the abovementioned protest cases. Thus it is said as to this case that although funds are expended for an unauthorized and therefore illegal purpose, the same may not be recovered back because the expenditure was made before final judicialdetermination of the illegality. Thus, under this rule, the taxpayers, at the first opportunity, may protest illegality, and sustain their position on the first possibility of trial of the issue, and again on appeal, only to find that in their complete victory they have utterly lost; though winning every engagement they have lost the conflict. An illegal expenditure of their own funds, which with all possible diligence and in the manner provided by law they sought to prevent, has been made before they could bring their successful efforts to afinality, and they are then denied the right even to obtain a return to the treasury of those illegally expended funds. I feel forced to disagree.

As pointed out in the majority opinion, the petition alleges that the expenditures involved were made for an unauthorized and illegal purpose. This is admitted by the general demurrer, and is taken by us as true for the purpose of testing the demurrer.

It seems to me that the majority opinion proceeds upon the theory that although the school district funds are expended for an unauthorized and therefore illegal purpose, those funds cannot be recovered back even in a timely action by the district, either from the officers who wrongfully allowed the claims and paid out the money, or from the persons who received the money.

This conclusion disregards the statute which fixes liability and right to recover in cases of illegal expenditure, as well as in cases of expenditure knowingly fraudulently made. The majority conclusion overthrows former decisions of this court where we have expressly held that recovery may be had for unauthorized and illegal expenditures, with no showing of bad faith.

In State ex rel. Wood v. Kimbrell, 152 Okla. 239, 5 P.2d 366, it was held in paragraph 3 of the syllabus:

"Taxpayers are compelled by the Constitution and the statutes to yield to governmental agencies in collecting and making a legal distribution of tax money, and these governmental agencies must with strict fidelity protect the taxpayers from obligations not authorized by law."

This case is not otherwise in point exactly, as it involves a fraudulent contract, but it does announce the statutory duty of the officers to protect taxpayers from obligations not authorized by law.

In State ex rel. Awtrey v. Randolph, 139 Okla. 254,281 P. 956, it was definitely held that the school board was liable for double the amount paid out on illegal claim's with nothing whatever said about knowledge of illegality on the part of the board. In the first paragraph of the syllabus it is held:

"In an action brought under sections 10383 and 10384, C. O. S. 1921, to recover double the amount of illegal claims paid by the members of the school board of a common school district, where it clearly appears from the evidence that the claims complained of and paid were illegal, held error on the part of the trial court, at the request of the plaintiff, to refuse to direct a verdict in his favor."

It must be remembered that section 5964, O. S. 1931, is identical with section 6831 mentioned in the majority opinion, except that 5964 includes county, city, and town officials as well as school district officials. In both sections the words "known" and "knowledge" and "notice" are identically used. In State v. Moreland, 152 Okla. 37, 3 P.2d 803, this court considered an action brought under sections 8590 and 8591, C. O. S. 1921, the same as sections 5964 and 5965, O. S. 1931. In the Moreland Case it was held in the 14th paragraph of the syllabus as follows:

"The knowledge of the officers referred to in section 8590, C. O. S. 1921, is knowledge of facts and not of law. County officers, as other citizens, are presumed to know the law and are charged with knowledge of the law. They may not be relieved of liability for their unlawful acts by a claim of ignorance of the law."

And in the body of the opinion it was definitely pointed out that:

"The language of section 8590, Id., 'known to such officers to be fraudulent or void,' refers to knowledge of facts and not knowledge of law. It is fundamental that every officer, as well as every other citizen, is charged with knowledge of the law, and no one may defend against the liability because of his ignorance of the law."

In State v. Cole, 178 Okla. 567, 63 P.2d 730, a taxpayer's action against city officers and Cole, who received the money, it was definitely held that recovery could be had under sections 5964 and 5965, O. S. 1931, upon a showing of illegality of contract and of expenditure, without showing fraud, which is clearly equivalent to a conclusion that bad faith is not necessary if it is true that illegality of the expenditure exists.

In Dorsett v. State, 144 Okla. 33, 289 P. 298, it was held in paragraph 5 of the syllabus:

"Every officer who shall order or direct the payment of any money belonging to any county in settlement of any claim made in pursuance of any unauthorized, unlawful, or fraudulent contract is liable to the county for double the amount of all such sums of money so paid as a penalty to be recovered in a suit brought by the proper officers of such county or any resident taxpayer thereof. C. O. S. sections 8590, 8591."

And it was pointed out in the body of the opinion that under these statutes, officers are liable for illegal expenditure, aside from the question of bad faith.

In McGuire v. Skelton, 36 Okla. 500, 129 P. 739, this court considered an action against township officers for illegal expenditure. There, as in the Cloudman Case, the trial court sustained a demurrer to the petition. In reversing, this court held the petition stated a cause of action to recover double the amount of unlawful expenditures. While the opinion does not copy the allegations of the petition, there is nothing in the opinion to indicate that this court deemed it important or material that the plaintiff allege and prove knowledge of illegality or bad faith. It might be assumed from the decision that the allegations were quite general.

In Moreland v. State, 175 Okla. 38, 51 P.2d 945, this court held most definitely that lack of knowledge of illegality, lack of bad faith, or good faith on the part of the officers was not a valid defense in such a suit for recovery of money illegally expended. In that case the officers urged their lack of bad faith and lack of knewledge of illegality, and upon trial sought to offer evidence of complete good faith, and that they had used every precaution to satisfy themselves that the claim was valid.

The trial court refused to admit such defensive proof and on appeal this court expressly sustained that holding.

In State ex rel. Morrison v. City of Muskogee, 70 Okla. 19,172 P. 796, this court considered the same statutory provisions in the 1910 Statutes, appearing there as sections 6777 and 6778. It was in that case definitely held that the city officials were liable for the unauthorized and illegal expenditure of $70,000. It was apparently deemed wholly unimportant whether the petition charged any bad faith or knowledge of illegality. It is clearly apparent from the petition that the officers acted without any bad faith, and, on the contrary, acted in entire good faith in a matter they deemed of considerable importance to the city. Nevertheless the expenditure of the people's money was for an unauthorized and therefore illegal purpose, and the officers were held liable.

In State ex rel. Shilling v. Oklahoma City, 67 Okla. 18,168 P. 227, this court held in paragraph 1 of the syllabus as follows:

"By reason of sections 6777 and 6778, Rev. Laws 1910, upon performance of the conditions therein prescribed, an action may be maintained in the name of the state on the relation of one or more resident taxpayers of a city against the officers of a city who have allowed a claim and paid out money of the city in pursuance of any unauthorized, unlawful, or fraudulent contract, and against any person to whom or for whose benefit such money should have been paid to recover double the amount of money so misappropriated."

In the body of the opinion it is clearly indicated that suit was based upon an expenditure of $40,624 alleged to be "upon an alleged unlawful, illegal, unauthorized and void contract." There, as in the Cloudman Case, the trial court sustained a demurrer to the petition, which this court reversed. There is nothing whatever in the opinion to indicate any necessity to allege or prove bad faith or knowledge of illegality.

In Dowler v. State, 179 Okla. 532, 66 P.2d 1081, we sustained a judgment against city commissioners for unauthorized and illegal expenditures and without any showing of bad faith.

The majority opinion, though not mentioning either of these nine former decisions, goes contrary to the principle of each of them. To reach this conclusion the majority opinion relies upon the following decisions: Sheel v. Ingram, 164 Okla. 244,23 P.2d 648; Dickey v. Cordell, 176 Okla. 205, 55 P.2d 126; Estus v. State, 83 Okla. 181, 200 P. 1002; Bodine v. McDaniel Auto Co., 69 Okla. 143, 170 P. 899; Bowles v. Perkinson,85 Okla. 244, 205 P. 770, and the Arkansas case of Hendrix v. Morris, 203 S.W. 1008.

The Sheel Case, supra, is not in point. It was based upon the misconduct of a county treasurer, county assessor, and tax ferret, described as being "malfeasance in office and a course of conduct of the most reprehensible nature," and constituting "a conspiracy for the purpose of cheating and defrauding the taxpayers of Osage county." That action involved funds, as stated in the opinion, "which plaintiff alleges were funds belonging to the county which had been misappropriated by the defendants to their own use and benefit."

The Dickey Case, supra, is not in point. It in no manner involves the expenditure of public funds. It does not concern the statutory rights and liabilities we here consider. It is an action to recover damages for loss of individual personal property, alleged to have resulted from negligence of H.B. Cordell, as State Warehouse Commissioner.

In the Estus Case, supra, the court considered an action to compel the county clerk to issue a warrant and the treasurer to register the same. It was specifically pointed out that a valid specific appropriation of funds for the purpose had been made, and that no protest was ever filed against making said appropriation. There was involved no illegality of purpose of expenditure. The officers were correctly required to issue and register the warrant within the fund appropriated. I do not see therein any support for the majority opinion.

The Bodine Case, supra, does support the majority opinion in so far as the majority opinion relieves the clerk of liability, bat does not support the majority opinion as to the other officers or persons involved in the instant case. There this court considered an action to compel Bodine, the county clerk, to issue a warrant on a claim approved by the board of county commissioners and within a specific appropriation. The clerk sought to contend that the motor vehicle purchased was not a necessary vehicle or equipment for road and bridge work. This court required him to issue the warrant, but took occasion three times in the opinion to point out that the county would be safe, and the commissioners would be liable to the county if the expenditure was unauthorized and therefore illegal. Nor was it said that such liability would depend on proof of knowledge of illegality or bad faith. This court was not there dealing with any question of the liability of the county commissioners to the county if such expenditure should be adjudged to be illegal. Therefore it would have been improper to express any definite view thereon. Nevertheless the court clearly implied that such a liability might exist. And a few years later, when such a liability on an identical expenditure was asserted, this court sustained the liability, on the illegality of the expenditure and without bad faith. Dorsett v. State, supra. Thus in the Bodine Case this court said:

"* * * There is no statute that makes the clerk in any way the guardian of the people's money or property, nor is he vested with any supervision in respect thereto. The statutes provide ample means for relief in cases of misappropriation of county funds by the board of county commissioners or unauthorized expenditures of the county's money. * * *"

And further in the opinion it was said:

"In this case it is not necessary to express, nor do we express, any opinion as to the authority of the board of county commissioners to purchase the automobile. We merely hold that, if such authority does not exist, the county has ample protection, not through the county clerk, but through other means wisely provided by the Legislature. * * *"

And further in the opinion it was said:

"* * * The members of the board of county commissioners and their bondsmen, not the county clerk, must respond in case of unlawful expenditure of public funds."

It is quite apparent that by those expressions this court meant that the county would have protection by the return of its money illegally spent, under these statutory provisions here considered. And that meaning was carried into effect in the subsequent Dorsett Case, supra. Thus in effect the Bodine Case is authority for the view contrary to the majority opinion in this case as concerns liability of other defendants than the clerk.

In the Bowles Case, supra, it was sought to require the mayor of a city to sign a warrant for a salary claim allowed by the city council. This court said the duty of the mayor was quite similar to that of the county clerk in attesting county warrants, and the Bodine Case was followed. This decision likewise sustains the conclusion that the clerk is not liable, but further than that is not in point at all.

I agree that the clerk of the board of education is not liable. That conclusion is supported by the Bodine and Bowles Cases, supra, but further than that the majority opinion is not supported by any former decision of this court. On the other hand, it is contrary to numerous former decisions of this court, as I have pointed out.

I regard it, then, as unimportant that the majority opinion is supported by the lone Arkansas decision in Hendrix v. Morris, supra, unless this court is now inclined to overrule our own numerous decisions and adopt the apparent view in Arkansas that officers are not liable for the illegal expenditure of public funds unless they act willfully or maliciously, or in bad faith. If our courts desired to adopt that view they could not do so as long as we have the specific statutes here involved. Those statutory provisions have been in effect continuously since statehood. Section 5964, O. S. 1931, 62 Okla. St. Ann. sec. 372, with historical notes. The provisions were re-enacted to have specific application to school district officers by the Fourth Legislature in 1913, as a part of the general school law then adopted. Sec S. L. 1913, chap. 219, page 518, art. 5, sec. 32; section 6831, O. S. 1931, 70 Okla. St. Ann. sec. 132. We have many times considered them, and heretofore enforced them.

I think we should now affirm the trial court's judgment in favor of the defendant clerk of the school board, and otherwise should reverse the judgment in favor of the other defendants, and remand the cause, with directions to overrule the general demurrers and let issue be joined and the causes be tried. Then, upon development of the facts, the liability of any defendant, and the amount thereof, if any, may be fairly and justly decided. In no other way can we follow the statutes, as I see it.

If this court should now consider adopting a different course, and basing that action on the Arkansas decision in Hendrix v. Morris, supra, it is interesting to note that in that case, as here, the suit was brought against the governing board and treasurer. And while in that case the members of the board were held not liable by reason of the great discretionery powers of such boards in that state, it was there held that the treasurer was liable.

Thus there is no cited decision by this or any other court which supports the majority opinion in the full extent to which it goes, and although the case is briefed at great length, I have not been able to find any fully supporting authority. I think we would do well, then, to follow our own statutes, and our own former decisions.