Standard Surety & Cas. Co. v. Kelley

PER CURIAM. This is an action by L. P. Kelley against W. T. Pemberton, who was a member of the board of county commissioners of Atoka county, and Standard Surety & Casualty Company of New York, surety on Pember-ton’s bond, to recover on five causes of action upon claims for material furnished and labor performed in repairing bridges and machinery for Atoka county at the request and under contracts with Pemberton. These claims were assigned to plaintiff Kelley and upon presentation payment was refused for the reasons that at the time the contracts were made the appropriation for that purpose for the fiscal year had been exhausted and that some of the claims were fictitious and fraudulent. These claims amounted in the aggregate to the sum of $1,853.55. Plaintiff based his causes of action on 62 O.S. 1941 § 479, which, among other things, provides that a member of a board of county commissioners of a county and his bondsmen shall be liable in a civil action where such commissioner contracts for, incurs, acknowledges, approves, allows, or authorizes any indebtedness against his county in excess of the estimate made and approved by the excise board for such purpose for the fiscal year. The defense was that Pemberton, in contracting the indebtedness and in approving claims therefor, was performing no official duty, and that therefore neither of them became liable upon refusal of payment of the claims. The trial was to the court who, at the request of defendants, made findings of fact and conclusions of law, and upon such findings and conclusions rendered judgment in favor of plaintiff for the entire amount claimed. Defendants have appealed. The defendant Surety Company has briefed the case and for reversal relies mainly upon the ground that the judgment is not supported by the evidence and is contrary to law. The first cause of action related to claims of Mrs. S. E. Rives, doing business under the name of Rives Lumber Company, for certain lumber sold to the county for construction and repair of bridges at the instance and request of Pemberton and amounting in the aggregate to the sum of $423.70. These claims were approved by Pemberton and were sold and assigned by Mrs. Rives to the plaintiff. Upon presentation of the *294 claims for payment the board of county commissioners refused payment thereon for the reason that the appropriation made for such purposes for the fiscal year had been exhausted. Defendant surety company contends that it was not liable for the reason that Pemberton had no authority to enter into a contract with Mrs. Rives for the purchase of lumber; that such contract could only have been made legally by the board of county commissioners in regular session and that Pemberton had no authority under the law to approve these claims for payment; that in entering into such contract and approving the claims Pemberton was performing no official duty; that he was not acting by virtue of his office nor when the decisions are properly construed was he acting under color of office. Since this action was brought under the provisions of section 479 of the statute, supra, it is not necessary to discuss this question. This court has definitely settled this question against the contention of the. Surety Company in the case of Smith Engineering Works v. Custer, 194 Okla. 318, 151 P. 2d 404. Defendant surety company further contends that the act in question is unconstitutional in that the subject matter contained in such section was not properly expressed in the title of the act. This contention has also been decided adversely to the defendant in the above case. The trial court ruled correctly in rendering judgment in favor of the plaintiff on his first cause of action. The fifth cause of action relates to a claim for labor by Jack Jackson, and a claim of Roy Phillips for labor on county bridges, which labor was contracted for by Pemberton and claims approved by him and thereafter assigned by them to plaintiff Kelley. Payment of these claims was also denied by the board of county commissioners on the same ground that the claims in cause of action number one were denied. The same defense is made to this cause of action as to cause of action number one. What is said as to that cause of action, therefore, applies to this cause of action. The trial court ruled correctly in entering judgment in favor of plaintiff on his fifth cause of action. As to the second, third, and fourth causes of action a different proposition is presented. These causes of action are based on claims of Chappell & Bagwell for material purportedly furnished and labor performed in repairing tractors and other machinery belonging to the county. These claims amounted in the aggregate to the sum of $1,419.15, which claims were assigned and sold by Chap-pell & Bagwell to plaintiff Kelly. The trial court found that these claims were fictitious and fraudulent; that Chappell & Bagwell performed no service for the county; that they repaired no trucks, tractors, or other machinery and performed no labor. The trial court further found that Joe Chappell of the firm of Chappell & Bagwell and Pemberton entered into a conspiracy to cheat and defraud the county of Atoka, and that in pursuance of such conspiracy Chap-pell was to prepare and file fictitious claims before the board of county commissioners which claims would then be approved by Pemberton and presented to the county for payment; that on different occasions such claims were prepared by Chappell, approved for payment by Pemberton and thereafter paid by the county. The trial court further found that these fictitious claims were presented by Joe Chappell for sale to plaintiff Kelley; that the claims had not then been approved by Pemberton for payment; that plaintiff refused to purchase the same until he had an opportunity to confer with Pemberton; that he afterwards did confer with him, that Pemberton represented to him that the claims were in all respects good and valid and that the same would be paid in the usual course of business and at plaintiff’s request endorsed his approval upon the claims. The trial court further found that when plaintiff presented these claims for payment the board of county commissioners refused payment thereon for *295 the reason'that the claims were fictitious and fraudulent. The evidence clearly supports these findings. Under these findings and the evidence we do not think that the surety company is liable to the plaintiff on these claims. It is obvious that upon refusal of payment of the claims, if they had remained in the hands of Chappell & Bagwell, the assignors, they could not have maintained an action against either Pember-ton or his surety on the bond on such claims. This being true, neither can their assignee. The plaintiff Kelley in acquiring these claims acquired no greater right thereto than his assignors, Chappell & Bagwell, had. He took them subject to all the equities and defenses that existed against them in the hands of Chappell & Bagwell, his assignors. Keys v. Ponder, 118 Okla. 234, 226 P. 73; Cooke v. Sinopoulo, 194 Okla. 352, 151 P. 2d 791. Plaintiff, however, contends that since Pemberton represented to him that the claims were in all respects valid and would be paid in due course of business and endorsed his approval thereon, both Pemberton and surety company became liable to him under section 479, supra. This contention cannot be sustained. Section 479, supra, does not purport to make an officer and his bondsmen liable under circumstances such as are here presented. It only purports to make such officer and his bondsmen liable where claims are contracted for, or indebtedness created, acknowledged, approved or allowed for payment in excess of estimate made by the excise board for such purpose for the fiscal year. It is quite obvious that the claims referred to in these causes of action do not come within the provisions of this section. It is probably true, as contended by plaintiff, that defendant Pemberton is liable to plaintiff. If this be true, such liability does not exist on the assigned claims. It exists only by virtue of the fact that Pemberton falsely and fraudulently represented to plaintiff that the claims were good and valid claims and would be paid and in entering his endorsement of approval thereon, thereby inducing him to purchase the claims. These acts of Pemberton, however, could not bind the defendant surety company. In making such representations and at the request of plaintiff endorsing his approval upon the claims, Pemberton was not acting in any official capacity. In performing such acts he was acting neither by virtue of his office nor under color of office. A case similar to the case at bar was presented to the Circuit Court of Appeals in the case of National Surety Co. v. State Savings Bank, 156 Fed. 21, 14 L. R. A. (N.S.) 155. In that case W. P. Bourne, a deputy county assessor, executed numerous county warrants made payable to a fictitious payee, which warrants he caused to be signed by the chairman of the board of county commissioners. Mr. Bourne then endorsed the name of fictitious payees upon the warrants, presented them to a bank for payment, and upon his representation that these warrants were valid warrants the bank purchased the same. The court held that no cause of action existed in favor of the bank against the surety company for any loss it might have sustained in purchasing the warrants. The court held the warrants nonnegotiable; that by its assignment the bank acquired no greater right to the warrants than had the supposed fictitious payees, that it took the warrants subject to all defenses and equities that existed against the warrants in the hands of these fictitious payees, and that since such fictitious payees could not have maintained any action against the surety company on the refusal of payment of the warrants, neither could the bank. In that case the court further said: .“The misconduct of Bourne in much of what he actually did and in what was necessarily involved, namely, in falsely representing to the bank that the orders were genuine, that the payees had paid money to the county treasurer for taxes, and were entitled under the law to an order refunding the amount so paid, that they were actual persons instead *296 of myths;, and his further misconduct in fraudulently. signing the mythical names to the assignments, in negotiating with the bank, and wrongfully securing its money, were altogether personal in their character . . . Within the fair and reasonable meaning of the bond and . statutes in question, Bourne’s personal, as distinguished from official, acts caused the assumed injury which the bank sustained.” What, is there- said applies to the case at bar. Without attempting to lay down a definite rule by- which it can be determined, as to whether; an act of an officer constitutes a personal as distinguished from an official act, we hold that the .acts committed by Pemberton and here relied, upon constitute personal as dis- , tinguished from official acts and that the surety on his bond is therefore not liable. We therefore conclude that the trial court erred in • rendering judgment against defendant Standard Surety & Casualty Company on plaintiff’s second, third, and fourth causes of action. As to defendant Pemberton a different proposition is presented. He has appealed from the judgment of the lower court and has filed in this court a petition in error. He has failed to brief the case. He has evidently abandoned his appeal. The record as to him discloses no fundamental error. The judgment as to defendant Pemberton is therefore affirmed. As to defendant Standard Surety & Casualty Company, the judgment is affirmed as to the first and fifth causes of action and reversed as to the second, third, and fourth causes of action and the causes remanded as to such causes of action, with directions to enter judgment thereon in favor of the said defendant. HURST, V.C.J., and OSBORN, BAY-LESS, WELCH, and CORN, JJ., concur. RILEY and DAVISON, JJ., dissent.