Cummings v. Bd. of Ed. Okla. City

• Decision Date: 21 April 1942
• Docket Number: Case Number: 29509
• Citation: 125 P.2d 989,190 Okla. 533,1942 OK 154
• Parties: CUMMINGS et al. v. BOARD OF ED. OKLAHOMA CITY
• Court: Oklahoma Supreme Court

1942 OK 154

125 P.2d 989

190 Okla. 533

CUMMINGS et al. v. BOARD OF ED. OKLAHOMA CITY

Case Number: 29509

Supreme Court of Oklahoma

Decided: April 21, 1942

Syllabus

¶0 1. LIMITATION OF ACTIONS--Statute of limitation as to "action upon a statute for a penalty" not tolled by active fraudulent concealment of cause of action.

Active fraudulent concealment of the existence of a cause of action does not suspend the operation of the statute of limitations (subdivision 4, sec. 101, O. S. 1931) as to an "action upon a statute for a penalty."

2. SAME--Different provisions of statute of limitations applicable to different provisions of statute penal in one respect and remedial in another or to different portions of recovery thereunder.

A statute may be penal in one respect and remedial in another and different provisions of the statute of limitations may be applicable to different provisions of the statute or different portions of recovery thereunder depending upon the penal or remedial character thereof.

3. PENALTIES--Pecuniary liability created by statute operating as punishment and unrelated to actual loss by one suing for recovery is a penalty and not a compensatory liability.

A pecuniary liability created by statute, operating as punishment to a wrongdoer, and having no relation to the actual loss sustained by him who sues for its recovery, is a penalty and not a compensatory liability created by statute.

4. LIMITATION OF ACTIONS--Action by school district to recover compensatory damages and penalty for wrongful expenditure of school funds for real estate--Judgment erroneous for failure to apply statute of limitation to recovery of statutory penalty.

Judgment in favor of a school district as plaintiff, embracing compensatory recovery as well as penalty upon a statute, examined, and held erroneous for failure to apply the statute of limitations insofar as it authorized the recovery of a statutory penalty.

5. SAME--SCHOOLS AND SCHOOL DISTRICTS--Remedies of defrauded school district though action for penalty barred by limitations--Measure of damages.

When a school district purchases real estate pursuant to a contract in connection with which one of the members of its board of education has received from the vendor a secret and fraudulent consideration for advocating the purchase, it may, upon discovery of the fraud (even though action for penalty under sections 6831 et seq., O. S. 1931, is barred by limitations) rescind the contract, tender a return of the real estate, and sue for the purchase price; or affirm the contract, keep the real estate, and sue for damages, in which case the measure of damages is the difference between the value of the real estate and the purchase price at the time of sale, but in no event less than the amount of the secret and fraudulent consideration.

Appeal from District Court, Oklahoma County; Lucius Babcock, Judge.

Action by Board of Education of Oklahoma City against D. R. Cummings and Ed W. Spivey. Judgment for plaintiff conditionally affirmed in part; otherwise reversed.

Everest, McKenzie & Gibbens and O. A. Cargill, all of Oklahoma City, for plaintiffs in error.

W. A. Lybrand, Henry G. Snyder, and Ross N. Lillard, all of Oklahoma City, for defendant in error Board of Education.

DAVISON, J.

¶1 This is an action to recover compensatory damages and penalty by reason of the wrongful expenditure of school district funds pursuant to a contract tainted with fraud at its inception.

¶2 The amount expended was $73,710. The disbursement was made by warrant on November 13, 1936. This action was instituted on December 23, 1938 (more than two years later) by the board of education of the city of Oklahoma City (hereinafter referred to as the board or school district), as plaintiff, against D R. Cummings and Ed W. Spivey, as defendants.

¶3 The cause was tried to the court without the intervention of a jury and resulted in a judgment for the plaintiff in the sum of $147,420, representing double the sum expended. One-half of the amount of the judgment was designated as penalty. The amount of recovery as determined in the judgment was based upon sections 6830-6832, O. S. 1931 (70 Okla., St. Ann. §§ 131-133).

¶4 The division of the sum recovered by classification of only a portion thereof as penalty was obviously made upon consideration of the case of State v. Ingram, 164 Okla. 244, 23 P.2d 648 (decided by this court in 1933).

¶5 The defendants Cummings and Spivey present the case to this court on appeal, appearing herein as plaintiffs in error. The order of appearance is thus reversed. However, our continued reference to the parties will be by their trial court designation unless otherwise indicated. While many intricate details are reflected by the record, the facts essential to a determination of this appeal may be briefly stated.

¶6 On November 13, 1936, the school district acquired by deed from D. R. Cummings a tract of land containing about 42 acres for school site purposes for which it paid by warrant then issued the previously mentioned $73,710.

¶7 It was later learned that, in connection with the transaction and pursuant to a clandestine agreement between Cummings, the vendor, and Spivey, who was then a member of the board of education, Spivey, for his part in promoting the purchase, secretly received from Cummings a "commission" of 10 per cent of the amount of the purchase price less certain deductions made and handled in an intricate manner to satisfy income tax requirements.

¶8 The income tax complications which arose in connection with this "side consideration" in no way affect the rights of the school district, and for the purposes of this litigation we will treat the matter as though the entire 10 per cent, $7,371, passed directly into Spivey's hands.

¶9 The existence and consummation of this secret agreement became known to the school district on July 2, 1938, when it was uncovered in connection with a grand jury investigation. Prior to that it was purposely, definitely, actively, and fraudulently concealed from all except a chosen few who enjoyed the unguarded confidence of the participants. Defendants assert in substance in this connection that the knowledge or limited knowledge of these "chosen few" remove & the cloak of concealment from the transaction. Obviously, there is no merit in this position. The transaction was successfully concealed until on or about the date above mentioned. It will be so treated in our subsequent discussion.

¶10 The property is still retained by the district. Its return was not tendered in this action. The evidence intimates that its value was equal or approximately equal to the amount expended by the district; however, the trial court did not regard the value as important and the worth of the property was not judicially determined in the trial tribunal.

¶11 Additional facts will be mentioned in the subsequent portions of this opinion as the need arises. The corrupt and fraudulent nature of the transaction is too obvious to merit discussion (see Abernathy v. State of Oklahoma, 31 F.2d 547). The facts conclusively show that the defendant Cummings became a party to one of the most dastardly and sneaking crimes covered by our penal statutes. He stands as a self-confessed bribegiver of a public official. The transaction constitutes an extremely aggravated character of fraud, since it embraces criminal characteristics of most reprehensible type, denoting dishonesty, criminal intent, and the worst form of corruption. We detest and abhor the actions of the participants of the fraud herein. However, from the standpoint of civil liability the fraudulent nature of the transaction, rather than its criminal aspect, is of paramount importance. The human tendency to condemn must not be permitted to distort the principles of law by which our decision must be controlled.

¶12 The defendants invoke the one-year statute of limitations contained in the fourth subdivision of section 101, O. S. 1931 (12 Okla. St. Ann. § 95) and applicable to an action "upon a statute for penalty." The plaintiffs seek to avoid the application of the limitation statute on the theory that the concealment of the cause of action suspended its operation--"tolled the statute."

¶13 On this point our conclusion is favorable to the defendants. We have decided that concealment of the cause of action should not have the effect of suspending the operation of the statute of limitations insofar only as the recovery involves a penalty imposed by statute.

¶14 On the other hand, we have also decided in connection with the recovery here involved that any and all portions of the amount recovered which can properly be classified as compensatory should be approved, although, as we shall subsequently point out, further proceedings in the trial court may be necessary to accurately determine the actual amount of injury suffered by the district.

¶15 It appears to be conceded in the briefs that insofar as that portion of the recovery which represents the penalty is concerned, the one-year period of limitation prescribed by subsection 4, sec. 101, O. S. 1931, supra, is applicable (see State ex rel. Estill v. Board of Commissioners, 119 Okla. 215, 249 P. 394: State ex rel. Gooch v. Drumright, 88 Okla. 244, 212 P. 991) unless the statute has been tolled. Plaintiff relies upon certain authorities from this jurisdiction in which we have given effect to the general rule that active fraudulent concealment of a cause of action tolls the statute of limitations. See Kansas City Life Ins. Co. v. Nipper, 174 Okla.. 634, 51 P.2d 741; Liberty Natl. Bank of Weatherford v. Lewis, 172 Okla. 103, 44 P.2d 127; Brookshire v. Burkhart, 141 Okla. 1, 283 P. 571, 67 A. L. R. 1059; Morrissey v. Carter, 103 Okla. 36, 229 P. 510; Depuy v. Selby, 76 Okla. 307, 185 P. 107; Oklahoma Farm Mortgage Co. v. Jordan, 67 Okla. 69, 168 P. 1029; Weems v. Melton, 47 Okla. 706, 150 P. 720; Waugh v. Guthrie Gas, Light, Fuel & Improvement Co., 37 Okla. 239, 131 P....