Wyatt-Doyle & Butler Engineers v. City of Eufaula

• Decision Date: 03 October 2000
• Docket Number: No. 91,325.,91,325.
• Citation: 13 P.3d 474,2000 OK 74
• Parties: WYATT-DOYLE & BUTLER ENGINEERS, INC., Appellant, v. The CITY OF EUFAULA, Appellee
• Court: Oklahoma Supreme Court

13 P.3d 474

2000 OK 74

WYATT-DOYLE & BUTLER ENGINEERS, INC., Appellant, v. The CITY OF EUFAULA, Appellee

No. 91,325.

Supreme Court of Oklahoma.

October 3, 2000.

Jack S. Dawson, James A Scimeca, Robert P. Skeith, Miller Dollarhide, Oklahoma City, Oklahoma, for Appellant.

David A. Davis, Oklahoma City, Oklahoma, for Appellee.

Diane Pedicord, Sue Ann Nicely, Oklahoma Municipal League, Oklahoma City, Oklahoma, Amicus Curiae.

WINCHESTER, J.:

¶ 1 Two issues are presented to this Court. The first issue is whether the Uniform Arbitration Act, 15 O.S.1991, §§ 801-818, forbids this Court from reviewing the contract submitted to the arbitrator where one party asserts that the contract before us is void because it is in violation of Article 10, § 26 of the Oklahoma Constitution. If this contract may be reviewed, the second issue is whether it violates this state's constitution. We hold that under these facts, the Uniform Arbitration Act does not prohibit review of the issue by this Court, and that the contract before us violates the constitution of this state.

¶ 2 According to the contract between the parties, which is a part of the record before this Court, the City of Eufaula, appellee, and the Eufaula Industrial Authority contracted for engineering services with Wyatt-Doyle & Butler Engineers, Inc., appellant, on January 10, 1994, for the development of Mega Stars Amphitheater and Amusement Park, an entertainment facility to be located in Eufaula. Wyatt-Doyle was to be paid under the contract by the Authority, and the City's liability was contingent on the Authority's failure to pay. The Authority paid to a certain point and subsequently filed bankruptcy. The City also failed to pay.

¶ 3 The contract between the parties contained a dispute resolution clause providing for arbitration of disputes arising under the contract. Pursuant to the clause, Wyatt-Doyle initiated an arbitration proceeding. The arbitrator determined that the City of Eufaula owed Wyatt-Doyle $184,641.42, plus interest. When the City of Eufaula failed to pay, Wyatt-Doyle commenced an action in the District Court of Oklahoma County to have the award confirmed and enter a judgment pursuant to 15 O.S.1991, § 811. The City of Eufaula argued that the district court lacked jurisdiction to enter judgment because the decision of the arbitrator violated Article 10, § 26 of the Oklahoma Constitution, and therefore the contract between the City of Eufaula and Wyatt-Doyle was void. The district court refused to confirm the award, and the Court of Civil Appeals affirmed its decision. We have previously granted certiorari.

I. DOES THE UNIFORM ARBITRATION ACT PROHIBIT REVIEW OF WHETHER THE CONTRACT IS IN VIOLATION OF ARTICLE 10, § 26?

¶ 4 Wyatt-Doyle argues that the City of Eufaula failed to show any statutory ground for vacation of the arbitrator's award and therefore the trial court erred in refusing to confirm the award.¹ The City of Eufaula answers that the existence of an arbitration clause in a contract should not determine whether the contract can exceed the constitutional debt limitation, and that to hold otherwise would allow a city to enter into a contract that it had no ability to pay, then submit the case to arbitration and force payment on its taxpayers without an election.

¶ 5 Article 10, § 26 of our Oklahoma Constitution provides in pertinent part:

"Except as herein otherwise provided, no county, city, town, township, school district, or other political corporation, or subdivision of the state, shall be allowed to become indebted, in any manner, or for any purpose, to an amount exceeding, in any year the income and revenue provided for such year without the assent of three_fifths of the voters. . . . " [Emphasis added.]

¶ 6 This constitutional provision forces cities and municipalities to operate on a cash basis, and prevents indebtedness payable out of tax revenues from extending beyond one year. Del City v. FOP, Lodge No. 114, 1993 OK 169, ¶ 5, 869 P.2d 309. It serves not only as a restriction on the city but also on the legislature; the legislature cannot relieve a municipality of the burden of following the mandate of § 26. Protest of Carter Oil Co., 148 Okla. 1, 2, 296 P. 485, 488 (1931); Perrine v. Bonaparte, 140 Okla. 165, 282 P. 332, 333 (1929); St. Louis-San Francisco Ry. Co. v. Andrews, 137 Okla. 222, 278 P. 617 (1929).

¶ 7 This Court has taken care to preserve this right of the people from early in our state's history. In re Town of Afton, 43 Okla. 720, 144 P. 184 (1914). In the Afton case, the legislature had enacted a statute that authorized the district court to validate indebtedness of a municipality that was invalid under the Constitution. The Court held that the legislature did not have the power to authorize the court to give life and validity to something that never had any legal existence. Afton, 144 P. at 186. The Court observed, "[I]t is the policy of our government and the spirit of the Constitution that debts shall not be contracted or in any way recognized as legal, when created in excess of the limitations of the Constitution." Afton, 144 P. at 187. The Court additionally observed that when the question of enforcing a plain provision of the organic law is weighed against the hardship falling on the parties who hold warrants for value and who relied upon the integrity of the people to pay this debt of honor, the Court must follow the plain provision of the Constitution. Afton, 144 P. at 187-188. If the contract between the City of Eufaula and Wyatt-Doyle violated Article 10, § 26 of our Constitution, then Wyatt-Doyle's reliance on an act of the legislature prohibiting review of the constitutional issue nevertheless will not validate the debt, and cannot prohibit our review. Stated another way, if the City of Eufaula has entered into an agreement that obligates the City of Eufaula to a debt that cannot be paid within a year as § 26 requires, then the fact that an arbitrator reviewed the contract with the consent of the parties still does not prevent this Court from reviewing the contract's validity.

¶ 8 "This Court is the Protector of our Constitution." In re Initiative Petition No. 344, 1990 OK 75, ¶ 16, 797 P.2d 326, 330. No statute can remove this duty and place the ultimate determination of a constitutional issue in an arbitrator. We have recognized that constitutional rights, even fundamental rights, may be waived. Seymour v. Swart, 1985 OK 9, ¶ 5, 695 P.2d 509, 511. Parties may waive their constitutional rights and have their dispute settled by an arbitrator. But Wyatt-Doyle cannot successfully argue that the City of Eufaula waived its constitutional right because Article 10, § 26 was not enacted as a protection for municipalities, but as a protection of the people from the excesses of governmental entities, which includes municipalities. The right does not belong to the City of Eufaula. It is not for the protection of the City of Eufaula, but it is a right meant to protect the taxpayers of Eufaula. The City of Eufaula cannot waive a constitutional right belonging exclusively to the people by submitting the question to an arbitrator.

II. IS THE CONTRACT IN VIOLATION OF ARTICLE 10, § 26?

¶ 9 Having decided that this Court may review whether Article 10, § 26 was violated, we now examine the issue of whether the agreement constituted a debt that violates the mandate of Article 10, § 26. Wyatt-Doyle argues that its agreement with the City of Eufaula did not constitute a debt contemplated by Article 10, § 26 because the obligation created by the contract was contingent on the default of the Eufaula Industrial Authority. Wyatt-Doyle cites City of Tulsa v. Langley, 1946 OK 123, ¶ 52, 168 P.2d 116, 123, and Board of County Com'rs of Tulsa County v. Mullins, 1950 OK 95, ¶ 28, 217 P.2d 835, 842, to support its argument that a debt for purposes of the applicability of Article 10, § 26, does not arise under an agreement unless the agreement states a sum certain to be paid within a specified period of time.

¶ 10 In the Mullins case, the Tulsa County Fair Board leased the pavilion building on the Tulsa County Fair Grounds to Mullins and Mitchell for five years. The lease included an agreement to keep the pavilion building in good repair. The Board of County Commissioners of Tulsa County sued to cancel the lease. One of the Commissioners' arguments was that the lease violated Article 10, § 26 because the lease obligated the county for the expenditure of funds and revenue beyond the fiscal year in which the contract was made. This Court answered the issue by holding that the lease contracted to do only what the law clearly required the Board of Directors of the Exposition and Fair to do, that is, to keep the buildings in a fair state of repair. The Court cited 1943 Okla.Sess.Laws, ch. 2, § 10, that the fees and charges collected shall be used, among other things, for operating and conducting the Exposition and Fair and for maintenance and repair of the buildings. Mullins, 1950 OK 95, ¶ 24, 202 Okla. 628, 217 P.2d at 841-842. Section 12 of the act provided that the Board of County Commissioners must include an amount in its estimate of the needs of the county for each fiscal year sufficient to pay for the expenses involved in conducting the Exposition and Fair, including the maintenance of buildings and upkeep of the grounds. The Court cited as a rule that this was an obligation imposed by law, to which Article 10, § 26, did not apply. After stating the rule the Court added that besides this complete answer, the lease did not create a debt. The Court reasoned that the Fair Board did not become impermissibly indebted until some material or services necessary in repairing the building were needed that were in excess of the revenue provided for the year in which the repairs were made. Mullins, 1950 OK 95, ¶ 29, 202 Okla. 628, 217 P.2d at 842. But regardless of the rationale used in Mullins, the facts reveal that the ...