Busch-Sulzer Bros.-Diesel Engine Co. v. City of Walters

• Decision Date: 14 January 1943
• Docket Number: No. 2586.,2586.
• Parties: BUSCH-SULZER BROS.-DIESEL ENGINE CO. v. CITY OF WALTERS.
• Court: U.S. Court of Appeals — Tenth Circuit

133 F.2d 65 (1943)

BUSCH-SULZER BROS.-DIESEL ENGINE CO. v. CITY OF WALTERS.

No. 2586.

Circuit Court of Appeals, Tenth Circuit.

January 14, 1943.

V. P. Crowe, of Oklahoma City, Okl. (Arthur B. Shepley, Jr., of St. Louis, Mo., Embry, Johnson, Crowe & Tolbert, of Oklahoma City, Okl., Nagel, Kirby, Orrick & Shepley, of St. Louis, Mo., and J. H. Cline, of Lawton, Okl., on the brief), for appellant.

Walter Hubbell, of Walters, Okl., for appellee.

Before PHILLIPS, HUXMAN, and MURRAH, Circuit Judges.

HUXMAN, Circuit Judge.

In September, 1936, the Busch-Sulzer Bros.-Diesel Engine Company¹ submitted a proposal to the City of Walters, Oklahoma,² to sell it a Diesel oil engine with accessories and equipment, for $29,521, payable in forty-eight monthly installments of $615.02 each. The City accepted the proposal, subject to the approval and authorization of the qualified property tax paying voters of the city, to be obtained in accordance with Section 27, Article 10 of the Constitution of Oklahoma. At a special election held for that purpose, the qualified voters authorized the purchase of the equipment, the creation of the indebtedness, and the payment thereof in forty-eight monthly installments. The City thereupon entered into a contract for the purchase of the equipment, to be paid for in forty-eight monthly installments, but did not provide for the collection of an annual tax as provided for in said section. The engine was delivered and installed and has been ever since and is now being used by the City. The City made twenty-six monthly payments and then refused to make further payments. The Company thereupon instituted this action in the United States District Court for the Western District of Oklahoma, praying judgment for the balance due on the contract, or that the court appraise the property and that the City be given the right to pay such value and retain the property, or upon refusal, that the Company have judgment for its return; or, in the alternative, that the City be required to pay the balance of the purchase price or return the property. Judgment was entered for the City and the Company has appealed.

The City places its main reliance upon two decisions by the Supreme Court of Oklahoma, Board of Commissioners v. Western Bank & Office Supply Co., 122 Okl. 244, 254 P. 741, and J. B. Klein Iron & Foundry Co. v. Board of Commissioners, 178 Okl. 72, 61 P.2d 1055, while the Company relies in the main upon the decision of the Supreme Court of Oklahoma in City of Pawhuska v. Pawhuska Oil & Gas Co., 118 Okl. 201, 248 P. 336, and the decision by this court in Fairbanks, Morse & Co. v. City of Wagoner, 10 Cir., 86 F.2d 288.³

It is a well settled equitable principle that the obligation to do justice rests upon all persons, natural and artificial, and that if a municipality obtains the money or property of another without authority, the law, independent of any statute, will compel restitution or compensation. See Fairbanks, Morse & Co. v. City of Wagoner, supra, and cases cited therein. Oklahoma recognizes and adheres to this principle. Its original decision in the Western Bank & Office Supply Company case, supra, was based thereon, and while on rehearing the court denied relief, it did not repudiate this principle but placed its ultimate decision on the narrow ground that a statute (§ 8638, Okla.Stat.1921, 62 O.S.1941 § 479) giving a remedy against the public officials who entered into an unauthorized contract was intended to provide an exclusive remedy for the party to the contract and that he therefore could seek no other. This was the interpretation we placed on the decision in Fairbanks, Morse & Co. v. City of Wagoner, supra. (See footnote 2, 86 F.2d 293.)

The Supreme Court of Oklahoma again considered the same question it had before it in the Western Bank & Office Supply case, in the recent case of J. B. Klein Iron & Foundry Co. v. Board of Commissioners, supra. It in no wise criticized the interpretation we placed on its decision in the Western Bank & Office Supply case. This leads us to conclude that we properly interpreted the effect of the decision in that case.

The case of City of Pawhuska v. Pawhuska Oil & Gas Co., supra, distinguishes between activities of a city that are controlled by Section 26, Article 10 of the Constitution, and those which fall within Section 27, Article 10. The distinction is made between purely governmental functions and proprietary functions of municipalities. It held that Section 26, Article 10, relates to and controls the governmental functions of municipalities, while Section 27, Article 10, regulates proprietary activities of municipalities.

Section 479, Title 62, O.S.Ann., which is the same as Section 8638, C.O.S.1921, discussed in the Western Bank & Office Supply Co. case, vitalizes Section 26, Article 10. This section makes it unlawful for any city official to incur any indebtedness against the city in excess of the estimate made and approved by the excise board for such purpose for the current fiscal year, and makes the officers contracting such excess indebtedness civilly liable therefor. The indebtedness incurred in the Western Bank & Office Supply Company case, as well as in the J. B. Klein Iron & Foundry Co. case, was incurred in the exercise of a governmental function and was in excess of the estimate by the excise board and was made without authority of the electors.

The City of Pawhuska case specifically holds that the debt limitation provisions of Section 26, Article 10, do not apply to a city in the operation...