City of Lowell v. Massachusetts Bonding & Ins. Co.

• Decision Date: 24 February 1943
• Court: United States State Supreme Judicial Court of Massachusetts Supreme Court
• Parties: CITY OF LOWELL v. MASSACHUSETTS BONDING & INS. CO. et al.

313 Mass. 257

47 N.E.2d 265

CITY OF LOWELL

v.MASSACHUSETTS BONDING & INS. CO. et al.

Supreme Judicial Court of Massachusetts, Middlesex.

Feb. 24, 1943.

Exceptions from Superior Court, Middlesex County; Greenhalge and Good, Judges.

Action of contract by the City of Lowell against the Massachusetts Bonding & Insurance Company and another on an official bond. Defendants consented to entry of judgment for plaintiff in the penal sum of the bond and interest and it was ordered that execution issue for $43,537.11, with interest, and both parties bring exceptions.

Exceptions overruled.

Before FIELD, C. J., and DONAHUE, QUA, DOLAN, and COX, JJ.

A. L. Eno, of Lowell, for plaintiff.

J. C. Reilly, of Boston (J. W. Flood, of Boston, on the brief), for defendants.

DOLAN, Justice.

This is an action of contract brought by the plaintiff city against Charles R. Flood, its former treasurer, and the surety on Flood's official bond, which was given on February 8, 1935, to assure the faithful performance of Flood's official duties as treasurer of the city. G.L.(Ter.Ed.) c. 41, § 35 (see now St.1939, c. 109, § 1), § 109A; c. 4, § 7, Thirty-fourth.

The alleged breach consisted of the payment by Flood of payrolls of the plaintiff's street department for the weeks ending October 5, 12, and 19 of the year 1935, to which payrolls there was not attached any affidavit of the plaintiff's superintendent of streets, and for the payment of which no warrant had been issued by the city auditor as required by G.L.(Ter.Ed.) c. 41, §§ 41, 52.

The original answers of the parties contained a general denial, and allegations that the payments involved were made in good faith to men properly hired who had done work for the city entitling them to the compensation paid, and were paid out of sufficient unencumbered appropriations; that the want of approval by the auditor or of oath by the head of the department was a purely technical omission not affecting the substantive right of the employees concerned to receive the money paid them; and that the payments by the defendant Flood discharged valid obligations of the plaintiff to its benefit and enrichment. On motion of the plaintiff these allegations were struck from the answers of the defendants as immaterial and irrelevant as a matter of law by the judge, who then reported the case to this court for determination of the correctness of his action. The case thus came before us (City of Lowell v. Massachusetts Bonding & Ins. Co. 304 Mass. 153, 23 N.E.2d 91), and the action of the judge was affirmed, the court holding that the ‘allegations in the answer, if proved, would not prevent judgment for the plaintiff in the penal sum of the bond, if the breach alleged should be proved,’ and that they ‘could affect only the amount ‘due and payable in equity and good conscience for the breach of the condition,’ for which the court ‘shall award an execution.” The court further said: ‘Even upon that issue we think those allegations immaterial’. 304 Mass. at page 155, 23 N.E.2d at page 92.

Thereafter the case came on for trial in the court below and was referred to an auditor. The material findings of the auditor follow: On February 9, 1934, the defendant Flood was the duly qualified city treasurer. For the three weeks in question Flood paid out by cash or checks payrolls of the street department aggregating $61,845.91. Checks that had not been cashed were outstanding to the amount of $241.60, leaving a balance of $61,604.31 (the sum sought to be recovered by the plaintiff together with interest). Of this sum $18,067.20 was paid to duly qualified permanent and temporary employees. The balance of $43,537.11 was paid to persons whose employment was in violation of the civil service rules. All the employees had been paid the prevailing wage rates for the work actually performed, and the city had received full value and benefit from the work equal to the amount paid in wages therefor, and the employees illegally employed were hired personally or expressly or impliedly by authorization of the superintendent of streets. ‘The defendants in no manner requested or influenced the employment of the temporary men.’ By order of the city council transfers of certain sums were made to the credit of street maintenance, which, taking into consideration certain items that had been improperly charged against the appropriation for street maintenance, resulted in a net deficit of $1,475.64. Unencumbered appropriations under the several classifications combined were, however, available to the street department and adequate to meet the payrolls in question. The defendants are not chargeable with the neglect to comply with the civil service laws and rules. A so called ‘reserve’ ordinance adopted in 1933 was in force during October, 1935. ‘Notwithstanding the adoption of a statutory budget for 1935, and the provisions of the ‘reserve system,’ the obvious intentions of the budget law and reserve system ordinance were completely ignored, and the system failed to function properly, either through the failure of the street department personnel to cooperate with the [city] auditor or through failure of the auditor's office to post his books to conform with the requirements of the system.' At this point in the opinion it is appropriate to state that one of the purposes of the so called reserve system ordinance was to assure current funds to pay each payroll by establishing encumbered balances in each department for the payment of permanent employees before any temporary or emergency workers could be employed. The auditor found, however, that ‘The defendants were in no manner responsible * * *’ for the failure to comply with the budget law and the ordinance just referred to.

In concluding his report the auditor found (1) that if employment ‘without strict compliance with the civil service rules * * * was illegal to the degree that the value and benefits to the city * * * cannot be established as a defence ‘in equity and good conscience” under G.L.(Ter.Ed.) c. 235, § 10, execution should be awarded the plaintiff in the sum of $43,537.11 with interest from September 10, 1936; (2) that if, on the contrary, that defence was open to the defendants, execution should be awarded the plaintiff in the sum of $1,475.64; and (3) that if ‘the court finds that the city * * * obtained good and sufficient value for the three October payroll expenditures, that adequate appropriations were available, and the defendants are not chargeable with the neglect to comply with the civil service laws and rules, the plaintiff * * * [should] not be awarded any damage.’

Upon the coming in of the auditor's report the plaintiff filed a motion that the report be recommitted for the purpose of having findings alleged to have been made on inadmissible evidence or based on erroneous opinion of law struck out. The auditor had appended to his report certain evidence that was admitted by him over the objection of either the plaintiff or the defendants. The motion just referred to was denied ‘but without prejudice to the right of the plaintiff to raise the same questions as to the admissibility of evidence before the trial justice.’ The plaintiff excepted to this action. We perceive no error therein. The case thereafter proceeded to trial by agreement of the parties, before a judge in the Superior Court sitting without a jury. At the outset of the trial the defendants consented to entry of judgment for the plaintiff in the penal sum of the bond and interest, and the judge ordered that judgment be entered accordingly for $92,449.58. The case was then heard before the judge without a jury, with relation to the amount for which executions should issue, G.L.(Ter.Ed.) c. 235, § 10, upon the auditor's report and other evidence, all the parties having reserved the right to introduce further evidence.

The plaintiff moved to strike from the report all findings relative to the value or benefit of work performed in return for the payments in question, and to ‘unmade’ transfers from the macadam sidewalk appropriation to street maintenance appropriation, and objected to their admission in evidence. The motion was denied subject to the plaintiff's exception. During the course of the trial the defendants introduced evidence tending to show that no notice was ever sent by the commissioner of civil service to any office of the plaintiff that certain persons were illegally employed and should not be paid, and to show that certain items charged to the street maintenance appropriation should have been charged to the macadam sidewalk appropriation. This evidence was admitted subject to the plaintiff's exceptions. The plaintiff introduced evidence to the effect that the civil service commissioner received copies of the payrolls in question of the street department on November 18, 1935, and that by letter, dated November 20, 1935, he notified the city auditor not to approve payment to any person other than the regular employees of the street department and those temporary employees whose employment had been approved by the department of civil service.

After hearing, the judge filed a ‘Statement of Findings and Rulings.’ Therein the judge adopted the facts found by the auditor as true, and found that the facts set forth in the evidence offered at the hearing before him were true. He also found that from the sum of $61,845.91, unlawfully expended by the defendant Flood, the defendants were entitled to have deducted $241.60 represented by uncashed checks, $15,959.46 paid in wages to permanent employees of the street department, $1,692.81 paid to duly authorized temporary employees, and $414.93 paid to persons eligible for temporary employment; that certain persons had not been employed in strict compliance with the civil service requirements; that their employment was illegal for that reason and created no liability on the plaintiff's part to pay compensation therefor; and that therefore the...