City of Oregon v. Ferguson

Strausbaugh, J. This is an appeal by plaintiff from a judgment of the Court of Claims dismissing plaintiff’s complaint for a failure to state a claim upon which relief may be granted. Plaintiff brought its action pursuant to R. C. 2743.03, alleging the following. “2. That it is now, and has been since November, 1958, a Charter Municipal Corporation organized under the constitution and laws of the State of Ohio. “3. That its charter provides for a Clerk-Auditor to be elected as provided therein; that one Rildred Fox was elected to that position as Plaintiff’s first Clerk-Auditor. On July 15, 1975 the Defendant, Bureau of Inspection and *96 Supervision of Public Offices made a finding against said Hildred Fox, as Clerk-Auditor, in the amount of Two Hundred Forty Nine Thousand, One Hundred Fifty One and 07/100 Dollars ($249,151.07). The office of Clerk-Auditor is a public office within the meaning of Section 117.09, Ohio Revised Code. “4. That it is a taxing district within the meaning of Section 117.01 et seq., Ohio Revised Code. “5. The Defendant, Thomas E. Ferguson, is the duly elected and acting Auditor of the State of Ohio. “6. That Section 117.01, Ohio Revised Code, created the Bureau of Inspection and Supervision of Public Offices in the office of Auditor of State. Section 117.01 makes the Auditor of State the Chief Inspector and Supervisor of Public Offices. “7. That Section 117.09, Ohio Revised Code, mandates that the Bureau of Inspection and Supervision of Public Offices shall examine each public office, at least once every two years. The examination shall inquire into the methods, accuracy, and legality of the accounts, records, files, and reports of the office, whether the requirements of the Bureau have been complied with, and further, each examination shall cover the period beginning with the termination date of the period covered in the most recent audit. ££8. That commencing November 25, 1958, the Defendants assigned a State Examiner to audit the books and records of the Office of Clerk-Auditor. Audit reports were filed with the Defendants showing no discrepancies or funds which were unaccounted for. These reports were reviewed, approved and filed by these Defendants. ££9. For the audit period commencing June 1, 1972, to December 10, 1974, the Defendants assigned a new State Examiner to make this audit, the previous audits having been made by the same State Examiner, except for one early audit. The audit for the period June 1, 1972 to December 10,1974 showed funds unaccounted for in the Clerk-Auditor’s office in the amount of Two Hundred Forty Nine Thousand, One Hundred Fifty One and 07/100 Dollars ($249,151.07). *97 “10. The State Examiner’s report was filed with the Toledo District Office, Bureau of Inspection and Supervision of Public Offices on June 12, 1975, and approved by that office on June 13,1975. The report was then filed with the Bureau in Columbus, Ohio, on June 26, 1975, and approved the same date. On July 15, 1975, the report was officially placed on record with the Bureau and after that date a copy was served on the Solicitor of the Plaintiff City. “11. Based on the findings of the State Examiner that Hildred Fox, Clerk-Auditor, was liable for the unaccountable funds, the Solicitor of the Plaintiff City filed a complaint in the Common Pleas Court of Lucas County, Ohio, and obtained judgment against her in cause No. 75-1569 in the amount of Two Hundred Forty Nine Thousand, One Hundred Fifty One and No/100 Dollars ($249,151.00), plus interest, which remains uncollected, and further, made demand on Auto Owner’s Mutual Insurance Company for payment of the Clerk-Auditor’s bond and payment was received in the amount of Five Thousand and no/100 ($5,-000.00) Dollars. “12. That the Defendants had full and sole control of the office of the Bureau of Inspection and Supervision of Public Offices including the selection and examiners in the field, the supervision and approval of the auditing methods used by the field examiner assigned to audit the office of Clerk-Auditor of Plaintiff City; that Defendants being in sole control failed to adopt procedures and/or methods of anditing which should have disclosed the shortage in the Clerk-Auditor’s account at its inception so as to minimize the loss sustained by Plaintiff. “13. The audit made and filed wih the Bureau that disclosed the shortage in the Clerk-Auditor’s accounts, according to a statement contained on Page 163 of the Audit Report, was made in accordance with generally accepted auditing standards and accordingly included such tests of the accounting records and such other auditing procedures as were considered necessary, in the circumstances. “14. That the loss in the amount of Two Hundred Forty Four Thousand, One Hundred Fifty One and no/100 Dol *98 lars ($244,151.00) sustained by Plaintiff was the direct and proximate cause of the negligence of Defendants and/or their Agents and Employees, in the manner in which the affairs of the Office of the Bureau of Inspection and Supervision of Public Offices were conducted; and further, in approving the prior audits which were inaccurate and misleading, all to the detriment of this Plaintiff; that had the Defendants followed the same procedure that was followed by the audit referred to in Paragraph 9 of the Complaint, that the discrepancy and the shortage would have been discovered at its inception. “SECOND CAUSE OF ACTION. “15. Plaintiff incorporates all the allegations contained in its First Cause of Action as if fully set forth herein, and further says that Defendants breached their statutory duties to this Plaintiff as set forth in Section 117.09, Ohio Revised Code, that it inquire into the accuracy and legality of the accounts, records, files and reports of the office. That the methods and procedures to be followed, and the capability of the employee hired in making the audit of the Plaintiff’s Clerk-Auditor’s office was solely under the control of the Defendants. That the loss sustained by Plaintiff was a direct and proximate result of the Defendant failing to carry out its mandatory duties as set forth in the statutes. “THIRD CAUSE OF ACTION. “Plaintiff incorporates all the allegations contained in its First and Second Causes of Action, as if fully set forth herein, and further says that Section 117.01, Ohio Revised Code, authorizes the Bureau of Inspection and Supervision of Public Offices to charge the taxing district for any and all audits that are authorized by Section 117.-09, Ohio Revised Code. That this Plaintiff has been charged, and has paid to the Bureau of Inspection and Supervision of Public Offices, the sum of Thirty Seven Thousand Five Hundred Seventy Five and 42/100 Dollars ($37,575.-42) representing the charges made by said Bureau for the audits through 1974. Plaintiff is entitled to be reimbursed in the amount paid for these audits for the rea *99 son that they were not conducted in accordance with. Section 117.09, Ohio Revised Code. * # *” The Court of Claims granted defendants’ motion to dismiss the complaint for a failure to state a claim upon which relief could he granted, and this appeal was taken. Plaintiff’s single assignment of error states: 1 ‘ The Court of Claims erred in its decision in dismissing the complaint of the plaintiff-appellant on the grounds that it failed to state a claim upon which relief could be granted.” Plaintiff contends that the cases relied upon by the Court of Claims, Smith v. Wait (1975), 46 Ohio App. 2d 281, and Shelton v. Indus. Comm. (1976), 51 Ohio App. 2d 125, are distinguishable from the case at hand, in that in Smith and Shelton the regulating agencies were created under the police powers of the state, and that statutory duties imposed by R. C. Chapter 1707 and Chapter 4121, were specifically directed to protect the people in general. R. C. 117.01 reads, in part: “This section creates the bureau of inspection and supervison of public offices, in the office of the auditor of state, which bureau shall inspect and supervise the accounts and reports of all state offices as provided in sections 117.01 to 117.19, inclusive of the Revised Code, including every state educational, benevolent, penal, and reformatory institution, public institution, and the offices of each taxing district or public institution in the state. * * *” R. C. 117.02 provides for the hiring of examiners by the bureau; R. C. 117.03 authorizes the hiring of experts by the bureau in order to carry out its statutory duties. R. C. 117.09 provides: “The bureau of inspection and supervision of public offices shall examine each public office, department, or agency at least once every two years, except that the offices of judges of county courts shall be examined at such times as the bureau determines. On examination, inquiry shall be made into the methods, accuracy, and legality of the accounts, records, files, and reports of the office, whether the laws, ordinances, and orders pertaining to the of *100 fice have been observed, and whether the requirements of the bureau have been complied with. Each examination shall cover the period beginning with the termination date of the period covered in the most recent audit.” E. C. 117.10 provides, in part: “The report of the examination made by the bureau of inspection and supervision of public offices shall set forth, in such detail as is deemed proper by the bureau, the result of the examination with respect to every matter inquired into. It shall be made and signed by the state examiner in charge of the examination or by a deputy inspector and supeiwisor, filed in the office of the bureau, and certified copies thereof filed in the office of the auditing department of the taxing district reported upon, and in the office of the attorney general, prosecuting attorney, city director of law, or mayor of a village as provided in this section. * * *” E. C. 117.15 provides, in part: “The total amount of compensation paid state examiners, their expenses, axxd the cost of typing reports shall be borne by the taxing districts to which such state examiners are so assigned by the chief inspector and supervisor or deputy inspectors and supervisors of public offices, except the annual vacation and sick leave of state examiners and typists shall be financed from the general revenue fund of the state through the biexxnial appropriations by the general assembly.” In Smith v. Wait, supra, this coxxrt held that the state is not liable for the fraudulent registration of securities by its officers and employees, in violation of express statutory provisions. We stated therein that the state’s waiver of its sovereign immunity from liability has not opened up the public coffers to all who may seek recompense but, rather, permits the liability of the state to be determined in accordance with the rules of law applicable to suits between private parties; such actions must be predicated upon previously recognized claims for relief, for which the state would have been liable except for sovereign immunity. *101 In Shelton v. Indus. Comm., supra, we reiterated this principle in holding that there is no cause of action against the state in the Court of Claims for the negligent failure of a state agency to inspect places of business or boilers and to enforce safety standards. In that case we stated that the Court of Claims Act does not create new duties, it only provides a remedy for existing duties where the state was previously immune from suit and a private party under similar circumstances would have been liable. We further stated, at page 130: “Construing that provision broadly, one could say that private parties who have a duty to inspect and to enforce safety standards are liable for their negligence in failing to do so and, hence, the state should be liable. Construing that provision more narrowly, one could say that a private party’s duty to inspect and to enforce safety standards is not created by statute, but only by virtue of some other legal relationship and, hence, there is no rule of law making a private party liable for a failure to perform statutory duties of inspection and enforcement of safety standards which were enacted to protect the health, safety and welfare of all of the citizens of Ohio. “The latter interpretation, in our opinion, is correct. Statutes requiring state agencies to inspect and enforce safety standards were enacted to protect the public generally against unsafe conditions. They were not intended, nor should they be so construed, to create a duty toward any particular person. Likewise their performance or nonperformance cannot be the basis of a tort action by an injured person.” Transforming those principles to the facts of this ease, private parties who have a duty to audit, examine, inquire into the methods, accuracy and legality of the accounts, records, files and reports of offices, if indeed there be any private parties to have such duty, such duty is not created by statute but only by virtue of some other legal relationship; hep.ee, there is no law making a private party liable for a failure to perform statutory duties enacted to protect thé health, safety and welfare of all the citizens .of *102 Ohio. The audit here was made for the public in general, although it is conceded that the city of Oregon would have the greatest interest in such audit. Likewise in Shelton, the inspection could be said to be made primarily on behalf of the person injured. We find that the facts of this case cannot be distinguished from those in Smith and Shelton and that the same principles apply. We would reiterate that if the general assembly disagrees with the judicial interpretation of the actual language used there is nothing to prevent it from making clear and unequivocal the intent to abolish immunity in any respect desired; but that the actual language used, when not clear, should be construed reasonably to at least make sure that before the public treasury is emptied the result was intended by the legislature. Plaintiff’s single assignment of error is overruled and the judgment is affirmed. Jud.gment affirmed. Reilly, J., concurs. Whiteside, J., dissents.