Abernathy v. State of Oklahoma

• Decision Date: 19 April 1929
• Docket Number: No. 8170.,8170.
• Citation: 31 F.2d 547
• Parties: ABERNATHY et al. v. STATE OF OKLAHOMA, ex rel. GOAR et al.
• Court: U.S. Court of Appeals — Eighth Circuit

31 F.2d 547 (1929)

ABERNATHY et al. v. STATE OF OKLAHOMA, ex rel. GOAR et al.

No. 8170.

Circuit Court of Appeals, Eighth Circuit.

April 19, 1929.

C. B. Stuart and John Tomerlin, both of Oklahoma City, Okl. (G. C. Abernathy, of Shawnee, Okl., on the brief), for appellants.

Roy F. Lewis and Tom C. Waldrep, both of Shawnee, Okl. (Randall Pitman, Goode, Dierker & Goode and Waldrep & Jones, all of Shawnee, Okl., on the brief), for appellees.

Before KENYON, Circuit Judge, and FARIS and SANBORN, District Judges.

KENYON, Circuit Judge.

This is an action at law brought in pursuance of the laws of Oklahoma, State, for Use of Board of Com'rs of Osage County, v. McCurdy, 115 Okl. 111, 241 P. 816, by that state, on relation of the county commissioners of Pottawatomie county, Okl., against the administrator of the estate of Robert Lee Alexander, deceased, formerly treasurer of said county, and the American Surety Company of New York, surety on the bond of said Alexander, to recover the sum of $75,000, public funds belonging to the sinking fund of said county, alleged to have been misappropriated by him in the purchase of certain bonds of the town of Devol, Okl. Said sinking fund of Pottawatomie county was created to take care of outstanding obligations which matured within five years from August 20, 1920. August 26, 1920, said county treasurer took $18,000 worth of bonds out of the investment account of the county and sold them to the Tecumseh National Bank. The money received therefor, was part of that used to purchase the $75,000 of bonds of the town of Devol, which bonds would not mature before 1946. It is without question that all the outstanding bonds and indebtedness of the county on the 26th day of August, 1920, were due and payable before the maturity of the Devol bonds. The county treasurer received a secret commission of $7,500 from the sellers of said bonds. A jury was waived in writing, and the trial court, upon request, made certain special findings of fact and announced conclusions of law. These findings of fact have the same effect as the verdict of a jury, and will not be disturbed if there is any substantial evidence to support them. 28 USCA § 773; Highway Trailer Co. v. City of Des Moines, Iowa (C. C. A.) 298 F. 71; Hirning v. Live Stock Nat. Bank (C. C. A.) 1 F.(2d) 307; Fleischmann Co. v. United States, 270 U. S. 349, 46 S. Ct. 284, 70 L. Ed. 624.

Under 28 USCA § 875, the findings being special, if the record warrants it our review may extend to the determination of the sufficiency of the facts found to support the judgment.

One of the court's findings of fact of controlling importance is: "I therefore find that this bribe money or corruption money was actually paid to Mr. Alexander the county treasurer." There was substantial evidence to support such finding; therefore it stands as established that the county treasurer entered into a corrupt contract with the seller of the bonds under which he received a commission of $7,500. The trial court also found that the Devol bonds were worth their face with interest, which was the amount paid therefor by the county treasurer; that while the county treasurer had the authority to invest the sinking fund of the county in said bonds, the contract was tainted with fraud and corruption; that the transaction was carried out by the county treasurer in violation of his trust and under the influence of a corrupting agreement which rendered the whole matter illegal and invalid; that the county had not ratified the contract by any action it had taken; that it was entitled to disaffirm the contract and be put back where it would have been "if no unfaithful action had been taken by its county treasurer," and that it was not important whether the county had lost or gained in the transaction; that the bond of the surety company, reciting "if he shall faithfully perform his duties," makes the company responsible for the act of the county treasurer, and that the county was entitled to recover the $75,000 which was wrongfully paid out by reason of the corruption of the county treasurer regardless of the value of the bonds purchased. A judgment was entered for said amount against appellants.

The main contention of appellants is that the amount of recovery should be the secret commission of $7,500 received by the treasurer and not the $75,000 paid out for the bonds of the town of Devol.

We consider first the question of the authority of the treasurer to invest the funds of the county in bonds or securities that did not mature prior to the date of the maturity of the obligations for which the sinking fund was created. The trial court held under the authority of National Surety Co. v. State, 111 Okl. 180, 239 P. 257, 261, that the treasurer had a right to purchase the bonds out of the sinking fund of the county. There is language in that case which undoubtedly is authority for that holding. Since that time however the Supreme Court of Oklahoma in the case of Bockoven v. Board of Com'rs, 131 Okl. 114, 267 P. 1053, has finally disposed of the question, and has taken a different view of the law from that suggested in National Surety Co. v. State, supra, and has squarely held that a county treasurer in Oklahoma can invest sinking funds in enumerated public securities which mature before the obligations to be paid out of such funds, but that the county treasurer and his surety are liable for purchasing, with the sinking fund, securities maturing after the maturity of securities payable out of said sinking fund. That is the last pronouncement of the Supreme Court of Oklahoma on the subject, which court suggests that it does raise a conflict with certain language employed by it in National Surety Co. v. State, supra. In construing a state statute the federal court is bound by the settled construction thereof by the highest judicial tribunal of the state where no question of general or commercial law or of right under the Constitution or laws of the United States is involved. Sioux City Terminal R. & W. Co. v. Trust Co. of North America (C. C. A.) 82 F. 124; Mudge v. Black, Sheridan & Wilson (C. C. A.) 224 F. 919; Mississippi Valley Trust Co. v. Railway Steel S. Co. (C. C. A.) 258 F. 346; Sioux City Terminal Railroad & Warehouse Co. v. Trust Co. of North America, 173 U. S. 99, 19 S. Ct. 341, 43 L. Ed. 628.

In view of the latest construction of the Oklahoma statute by the Supreme Court of that state, the treasurer had no authority to buy the bonds here involved. Notwithstanding what the law was at the time of the decision by the trial court, we think we should follow the last-settled construction of the statute by the Supreme Court of Oklahoma. Were we under no limitation as to the construction of the statute by any decision of the state Supreme Court, we should have no hesitancy in holding that a county treasurer in Oklahoma had no authority to invest the moneys of the sinking fund of a county in bonds not maturing in time to take care of the very obligations for which the sinking fund was created. Appellants insist that if the court take this view of the case then the action is barred by the statute of limitations. No finding was asked on this question. While pleaded it was never called to the attention of the court, and the court did not pass on it in any way. Therefore it is probably not before us at all. However we refer to it briefly.

Appellants claim that under subdivision 2 of section 185, Comp. Okl. Stat. for 1921, which reads as follows, "Limitation of other actions. Civil actions, other than for the recovery of real property, can only be brought within the following periods, after the cause of action shall have accrued, and not afterwards: * * * Second. Within three years: An action upon a contract express or implied, not in writing; an action upon a liability created by statute, other than a forfeiture or penalty," the action is barred because not brought within three years.

Appellees on the other hand contend that the action properly arises under the fifth subdivision of said section reading as follows: "Fifth. An action upon the official bond or undertaking of an executor, administrator, guardian, sheriff or any other officer, or upon the bond or undertaking given in attachment, injunction, arrest or in any case whatever required by the statute, can only be brought within five years after the cause of action shall have accrued," and therefore the action is not barred.

There is no question of the statute of limitations as to that part of the complaint dealing with the question of fraud, it being without dispute that the fraud was not discovered until 1926, and the statute does not commence to run until discovery of the fraud. Morrissey v. Carter, 103 Okl. 36, 229 P. 510. If the three-year subdivision is to apply, then the action to recover, outside of the question of fraud, would concededly be barred. Two decisions of the Supreme Court of Oklahoma, National Surety Co. v. State, 111 Okl. 180, 239 P. 257, and State for Use of Board of Com'rs of Osage County v. McCurdy, 115 Okl. 111, 241 P. 816, seem conclusively to establish that the five-year limitation is the one applicable. In the latter the court says (syllabus): "Where suit is brought against a county treasurer and the sureties on his official bond, for the value of securities unaccounted for by the county treasurer, the one-year statute of limitations does not apply; but the action is upon a written contract — the surety bond — and the five-year statute of limitations applies."

The cause of action we are now discussing arose when the board of county commissioners knew in their official capacity of the wrongful act of the treasurer in using its money to buy the bonds maturing after the maturity of bonds protected by the sinking fund. National Bank of Claremore v. Jefferies, 126 Okl. 283, 259 P. 260. The record is not clear as to just when this information came to said board — hence we would be unable to...