Gentis v. Hunt

• Decision Date: 23 June 1925
• Docket Number: Case Number: 14850
• Citation: 247 P. 358,121 Okla. 71,1925 OK 529
• Parties: GENTIS et al. v. HUNT, Trustee, et al.
• Court: Oklahoma Supreme Court

1925 OK 529

247 P. 358

121 Okla. 71

GENTIS et al. v. HUNT, Trustee, et al.

Case Number: 14850

Supreme Court of Oklahoma

Decided: June 23, 1925

Syllabus

¶0 1. Schools and School Districts -- Current Expenses--Constitutional Limitation.

The intention and plain purpose of section 26, art. 10, of the Constitution of Oklahoma is to require school districts and other subdivisions of the state government to carry on their operations upon a "cash or pay as you go plan." The revenues of each year must take care of the expenditures of such year, and any liability, sought to be incurred in excess of such current revenue in hand or legally levied, is void, unless it be authorized by a vote of the people and within the limitations provided by said section.

2. Same--Illegal Contracts Seeking to Create Liability Against Funds of Subsequent Fiscal Year.

Where the defendant school board, during one fiscal year, enters into contracts which undertake to create a liability against funds of the subsequent fiscal year for services then to be performed, held, in a suit against the school district to recover thereunder for services performed during such subsequent year and after the estimate made and approved for such purpose was diverted and exhausted during that fiscal year, that said contracts, were entered into in contravention of the intention and plain purpose of section 26, art. 10, of the Constitution, and therefore do not create a legal liability against the district.

3. Same--Persons Contracting Charged with Notice of Legal Limitations on Municipality.

He who deals with a municipality does so with notice of the limitation on its or its agents' powers. All are presumed to know the law, and those contracting with it do so with reference to the law; and if they go beyond the limitations imposed, they do so at their peril.

4. Same--Valid Contracts not Affected by Subsequent Diversion of Funds.

Where an independent school district enters into contracts with teachers truck drivers, and janitors, for services to be performed during that fiscal year, and the aggregate amount of such contracts, together with other obligations legally created for such purpose, is within the limits of the estimate made and approved by the excise board, and where such contracts are in all other respects regular and lawful, they create a valid obligation against such district. The fact that the school district board thereafter carelessly or ignorantly exhausts the appropriation for such purpose before the completion of said contracts, and then refuses payment, "for want of funds," cannot militate against the right to compensation for services performed under such contracts. In legal contemplation, the total amount of such a legal contract is always on hand and reserved until lawfully paid out in discharge of the obligation of the district under such contracts.

Error from District Court, Tulsa County; Albert C. Hunt, Judge.

Action by John W. Hunt, trustee, against the Board of Education of the Town of Jenks, in which I. J. Gentis et al., as taxpayers intervene and defend. From a judgment in favor of plaintiff, interveners appeal. Affirmed in part, and reversed in part.

Louis W. Pratt and J. M. Springer, for plaintiffs in error.

Eugene O. Monnett and Wash Hudson, for defendants in error.

MASON, J.

¶1 This action was commenced in the district court of Tulsa county, Okla., by plaintiff in error, John W. Hunt, trustee, against the board of education of the town of Jenks, Okla., which is independent school district No. 27 of Tulsa county, to recover on 35 causes of action for services rendered under contracts with said district by 29 teachers, 3 janitors, and 3 truck drivers during the months of April, May, and June, of the year 1922.

¶2 The board of education answered by a general denial. The plaintiffs in error herein were permitted to intervene, and filed an answer alleging that they, in common with other taxpayers of the district, were the real parties in interest, and that their property was affected by the attempt of the plaintiff to obtain a judgment upon said claims, which they alleged to be illegal and void and in violation of the Constitution and laws of Oklahoma. They denied any liability on the part of the defendant, board of education, and specifically alleged that the total income and revenue provided for the fiscal year beginning July 1, 1921, and ending June 30, 1922, had been exhausted and paid out before the first day of April, 1922, and that the board of education was wholly without funds and was not allowed to become indebted in any manner or for any purpose to the plaintiff or any other persons during the months of April, May, and June, 1922, when the services were alleged to have been rendered for which judgment was demanded by the plaintiff.

¶3 Upon trial of the case to the court, judgment was rendered for the plaintiff for the full amount sued for, from which the interveners have duly perfected this appeal.

¶4 The facts in the case are substantially as follows: That the claims sued on herein were based upon contracts entered into on various dates from March 28, 1921, to January 9, 1922; that 22 of said contracts were entered into prior to July 1, 1921, or the first of the fiscal year 1921-22; that the proper designation of said school district is independent school district No. 21, of Tulsa county; that the aggregate amount of said contracts was approximately $ 40,000, and that the appropriation and estimate made and approved by the county excise board for such purposes was approximately $ 29,000; that the entire appropriation made for such purpose was exhausted on April 1, 1922; that the claimants continued to render services under said contracts during the months of April, May, and June, 1922, although they had notice in advance thereof that there were no funds available for such services; that, after such services were rendered, during said three months time, and after their claims were disallowed because of the lack of funds to pay the same, all claims were assigned to the defendant in error, John W. Hunt, as trustee, for the purpose of filing this suit for the collection of same.

¶5 Some contention is made by defendants in error that the record does not affirmatively show the amount of the estimate approved by the excise board. Such contention is based upon the failure of said board to place the amount of the various items in the column headed "Appropriation by Excise Board". But, inasmuch as it is apparent from the photographic copy of the estimate in the record that said board inadvertently placed said amounts in the adjoining column, we think this contention is without merit.

¶6 The record further shows that these contracts, from one to 21, inclusive, were entered into prior to the first of the fiscal year beginning July 1, 1921; that no funds at that time were available to pay the teachers' salaries under the said contracts; that no estimate had been approved by the excise board, and that no levy had been made for that fiscal year; that, at the beginning of the fiscal year of 1921 and 1922 the excise board approved an estimate and a levy was made providing a total of $ 34,239.64 for salaries for teachers, janitors, and truck drivers for the said district during the said fiscal year; that thereafter the board of education entered into the contracts involved in causes of action 2, 7, 12, 17, 20, 28, 29, 30, 31, 32, 33, 34, and 35, the total of which were within said estimate and income so provided for the said fiscal year.

¶7 For reversal, the plaintiffs in error contend that, inasmuch as the aggregate amount of said contract was far in excess of the appropriation and estimate made and approved for such purpose, said contracts were illegal and unenforceable, and that services rendered thereunder during the months of April, May, and June, 1922, and after the appropriation or approved estimate was exhausted, did not create a legal liability against said school district, and that therefore the trial court erred in rendering judgment for the plaintiff.

¶8 The defendants in error contend that, if a contract, when made, with a municipality of the state of Oklahoma, is within the income and estimate of said municipality, made and approved for such purpose, a subsequent diversion or lack of funds on the part of said municipality will not invalidate or affect such contract. If the estimate has been made, and the income fixed at the time of making the contract, this is a correct statement of the law. This rule has been announced by this court in the following case: Buxton & Skinner Stationery Co. v. Board of Commissioners of Craig County, 53 Okla. 65, 155 P. 215; State Bank of Miami v. City of Miami, 43 Okla. 809, 144 P. 597; Fairbanks Co. v. City of Sulphur, 62 Okla. 10, 161 P. 811.

¶9 On the basis of this proposition, the defendant in error then insists that contracts 1 to 21, inclusive, which were made prior to the estimate and levy for the fiscal year beginning July 1, 1921, in employing a part of the teachers for the fiscal year beginning July 1, 1921, prior to the making of an estimate and levy, are valid, since the amount of the same, together with all valid pre-existing indebtedness for the same purpose, did not exceed the estimate made and approved by the county excise board and income for such purpose. The record shows that the total consideration to be paid to the teachers under the said contracts was $ 29,150, and that the total estimate subsequently made and approved for teachers' salaries for the said year was $ 29,383.58.

¶10 It is contended that the action of the board of education in entering into the contracts after July 1, 1921, was an illegal diversion of the funds available to pay the salaries due under the contracts which were entered into by the said board prior to July 1, 1921, and that, under the principle announced in the last above cited cases, such subsequent diversion could not affect the validity of...