Kirchner v. Kansas Turnpike Authority, 7548.

• Decision Date: 11 September 1964
• Docket Number: No. 7548.,7548.
• Citation: 336 F.2d 222
• Parties: John E. KIRCHNER, Appellant, v. The KANSAS TURNPIKE AUTHORITY, Appellee.
• Court: U.S. Court of Appeals — Tenth Circuit

336 F.2d 222 (1964)

John E. KIRCHNER, Appellant, v. The KANSAS TURNPIKE AUTHORITY, Appellee.

No. 7548.

United States Court of Appeals Tenth Circuit.

September 11, 1964.

Emmet A. Blaes and Harry L. Hobson, Wichita, Kan., for appellant.

Malcolm Miller, Wichita, Kan. (George B. Powers, Charles J. Woodin and William Timmerman, Wichita, Kan., with him on the briefs), for appellee.

Before PHILLIPS and LEWIS, Circuit Judges, and CHRISTENSEN, District Judge.

CHRISTENSEN, District Judge.

Federal jurisdiction being based on diversity of citizenship, this suit for damages for breach of contract primarily involves a problem of state law. On November 10, 1960, the Kansas Turnpike Authority entered into a contract of employment with the appellant Kirchner as general manager of the Authority at a salary of $16,500 a year for a period of three years, beginning February 10, 1961, and expiring February 10, 1964. On June 26, 1961, the Turnpike Authority terminated the employment of Kirchner under the contract. Kirchner brought this action against the Authority to recover compensatory and punitive damages for breach of contract. From a judgment in favor of the Authority, Kirchner has appealed.

The facts affecting liability are not in dispute. Two questions of law are presented:

1. Was the appointment of Kirchner as general manager under the contract an appointment to an office the tenure of which had not been declared by law, within the meaning of Article 15, § 2 of the Kansas Constitution, so that such tenure was only during the pleasure of the Authority making the appointment; and

2. Was the contract invalid because the term of employment extended beyond the possible term of service of a majority of the members of the Turnpike Authority at the time it was made, or did it become invalid because their terms were terminated by statute prior to the expiration of the term of the contract?

The trial court decided both of those questions in favor of the Authority.

The Turnpike Authority was created by an Act of the Kansas Legislature which became effective April 7, 1953. Laws of Kansas, 1953, ch. 308, pp. 570-581.¹ Section 3 of the Act as amended in 1959 (G.S.Kan., 1959 Supp. § 68-2003), in part provided:

"SEC. 3. Kansas turnpike authority. There is hereby created a body politic and corporate to be known as the `Kansas turnpike authority.\' The authority is hereby constituted a public instrumentality and the exercise by the authority of the powers conferred by this act in the construction, operation and maintenance of turnpike projects shall be deemed and held to be the performance of an essential governmental function."

It was further provided that the Authority should consist of seven members: Four appointed by the Governor to serve for terms expiring July 1, 1954, July 1, 1955, July 1, 1956, and July 1, 1957, respectively; a fifth member, the State Director of Highways; a sixth member, the Chairman of the Committee on Highways of the Senate; and the seventh member, the Chairman of the Roads and Highways Committee of the House; and that the successor of each appointed member should be appointed for a term of four years. Thus it will be seen that at the time of the making of the contract, November 10, 1960, and at the time of the effective date thereof, February 10, 1961, the terms of three of the appointed members would expire before the end of the term of the contract and the term of one, a member appointed July 1, 1960, would extend beyond the term of the contract, while the terms of the ex officio members might or might not extend beyond the term of the contract.

Section 4 of the Act provided that the Authority was authorized and empowered to adopt bylaws for the regulation of its affairs and the conduct of its business; to determine the location of each turnpike project financed under the Act and its design and materials of construction and "construct, maintain, repair and operate the same;" to issue bonds to provide such funds for any of its corporate purposes, payable from tolls and revenues pledged for their payment; to establish rules and regulations for the use of any turnpike; to make and enter into "all contracts and agreements necessary or incidental to the performance of its duties and the execution of its powers under this act;" and "employ consulting engineers, attorneys, accountants, construction and financial experts, superintendents, managers, and such other employees and agents as may be necessary in its judgment, and to fix their compensation;" and "do all acts and things necessary or convenient to carry out the powers expressly granted in this act."

Section 3 of the Act provided:

"The authority shall elect one of the members as chairman of the authority and another as vice-chairman, and shall also elect a secretary-treasurer who need not be a member of the authority. The chairman, vice-chairman and secretary-treasurer shall serve as such officers at the pleasure of the authority."

Article III, paragraph 1, of the bylaws adopted by the Authority and in effect at the time the contract here involved was entered into provided under the heading "Officers":

"1. The officers of the Authority shall be a Chairman, a Vice-Chairman and a Secretary-Treasurer, the last named need not be the same person. The Chairman, Vice-Chairman and Secretary-Treasurer shall hold such offices until the election of their successors."

There was a further provision that in addition to the officers above mentioned, the Authority "may provide for such deputies, assistants and other officers as it may deem necessary from time to time. * * *" Under the separate heading "Employment", it was stated by the bylaws, in the words of the statute, that the Authority "may provide for the employment of such consulting engineers, attorneys, accountants, construction and financial experts, superintendents, managers, and such other employees and agents as may be necessary in its judgment. * * *" An agreement employing a general manager for a term of three years, in form similar to the one with which we are concerned, had been entered into by the Authority on October 14, 1957. After the expiration of the reserved basic three year term, it was terminated by the Authority by 90 days notice in accordance with the agreement of the parties. It was upon the termination of the former agreement that appellant was employed.

Paragraph 5(n) of the stipulation of facts reads:

"(n) The General Manager exercised the authority generally expected of an executive manager in carrying out the responsibilities of the Authority, subject to its constant supervision, approval and direction."²

The terms of the trust agreements between the defendant and the Guaranty Trust Company of New York, The Fourth National Bank and Trust Company, Wichita, and the Riverview State Bank, are referred to in plaintiff's contract with defendant. Section 1301 of Article XIII of the trust agreement of October 1, 1954, provides:

"In the event of the dissolution of the Authority all of the covenants, stipulations, obligations and agreements contained in this Agreement by or in behalf of or for the benefit of the Authority shall bind or inure to the benefit of the successor or successors of the Authority from time to time and any officer, board, commission, authority, agency or instrumentality to whom or to which any power or duty affecting such covenants, stipulations, obligations and agreements shall be transferred by or in accordance with law, and the word `Authority\' as used in this Agreement shall include such successor or successors."

By the Act of May 1, 1961, Laws of Kansas, 1961, ch. 307, § 1, (G.S.Kansas 1961 Supp. 68-2003), the Kansas legislature amended the Turnpike Act so as to reduce the number of appointed members from four to two, with the same ex officio members to serve. It provided that the two new members should be appointed on May 1, 1961, one for a term of three years and one for a term of four years, and that upon the appointment of the two new members of the Authority under the provisions of the amendment the terms of the existing appointed members should be terminated and that they should surrender their offices and all property and funds under their control.

On June 26, 1961, the Authority undertook to combine the offices of general manager and chief engineer and to create a new position of chief engineer-manager, to appoint the then chief engineer to the new position and to terminate appellant's employment as general manager. As a matter of fact, only one of the persons who were ex officio members of the Authority at the time the contract was entered into with appellant was a member of the Authority on June 26, 1961. Two who were ex officio members of the Authority on November 10, 1960, ceased to be members within the three-year term of the Kirchner contract.

Article 15, Section 2 of the Kansas Constitution provides:

"Tenure of office; merit system in civil service. The tenure of any office not herein provided for may be declared by law; when not so declared, such office shall be held during the pleasure of the authority making appointment; but the legislature shall not create any office the tenure of which shall be longer than four years, except that appointments under a merit system in civil service shall not be subject to such limitation. * * *"

We are of the opinion that appellant, as general manager of the Authority, was not an officer or the holder of an office within the contemplation of the Kansas Constitution. Section 4 of the Turnpike Authority Act, supra, classified "superintendents" and "managers" as employees, and the form and substance of the bylaws of the Authority, in keeping, as they are, with the statute, support this conclusion. It is true, as pointed out by respondent, that in the preamble to the form of contract employing the general managers it was recited as desirable that the Authority have such an "officer" to manage and...