Klamath County School Dist. v. American Sur. Co. of N. Y.

• Decision Date: 26 March 1929
• Parties: KLAMATH COUNTY SCHOOL DIST. v. AMERICAN SURETY CO. OF NEW YORK ET AL. [*]
• Court: Oregon Supreme Court

275 P. 917

129 Or. 248

KLAMATH COUNTY SCHOOL DIST. v. AMERICAN SURETY CO. OF NEW YORK ET AL. ^[*]

Supreme Court of Oregon

March 26, 1929

Department No. 2.

Appeal from Circuit Court, Klamath County; J. U. Campbell, Judge.

Action by the Klamath County School District against the American Surety Company of New York and another. From the judgment named defendant appeals. Affirmed.

This is an action by Klamath county school district, a quasi municipal corporation, upon the official bond of defendant G K. Van Riper, former treasurer of Klamath county, Or., and the American Surety Company of New York, a corporation, as surety thereon, to recover the sum of $15,000 with interest. Defendant American Surety Company of New York appeals.

J. H Carnahan, of Klamath Falls, for appellant.

Robert B. Kuykendall, of Klamath Falls (Kuykendall & Kuykendall, of Klamath Falls, on the brief), for respondent.

Teal, Winfree, McCulloch & Shuler, of Portland, on the brief, amici curiæ.

BEAN J.

The cause was submitted and determined by the court, without a jury, on the pleadings between the plaintiff and the defendant American Surety Company of New York and an agreed statement of facts. Defendant Van Riper was not served with summons of complaint, and did not appear, but was out of the state. By the stipulation, all of the legal questions arising on the pleadings were reserved.

The facts deemed essential to state, as shown by the stipulation, are substantially as follows:

The defendant G. K. Van Riper was the duly elected, qualified, acting treasurer of Klamath county, Or., from January 3, 1921, to January 5, 1925. On or about December 11, 1920, he executed and delivered to the state of Oregon his official undertaking or bond as such treasurer with the defendant American Surety Company of New York as surety. About May 1, 1921, school district No. 53 in Klamath county duly issued and sold its bonds to Clark Kendall & Co. in the amount of $31,479, the sale netting the district $30,000 cash.

About June 9, 1921, school district No. 53 had the bonds taken to the office of G. K. Van Riper, the county treasurer of Klamath county, and requested the treasurer to register the bonds. The treasurer entered the name, number, amount, and the like of each of said bonds in the registration book of the county treasurer, and thereupon signed a registered certificate on each of said bonds, and thereupon delivered the said bonds to one Oscar Shive of the American National Bank of Klamath Falls, who had taken the bonds to the county treasurer for the school district.

This delivery was made without the treasurer receiving the money for the bonds. The net amount derived from the sale of said bonds was thereafter paid by Clark Kendall & Co. to school district No. 53 and deposited in the American National Bank of Klamath Falls to the credit of said school district No. 53. Thereafter the board of directors of school district No. 53 transferred $15,000 of said moneys from the American National Bank of Klamath Falls to the First National Bank of Klamath Falls, Or., and thereafter the said board of directors transferred the last-named $15,000 from the First National Bank of Klamath Falls, Or., to the First State & Savings Bank of Klamath Falls, Or., now insolvent, and received certificates of deposit therefor.

Thereafter the First State & Savings Bank of Klamath Falls became insolvent, and the funds have never been repaid to school district No. 53 or to the plaintiff herein, or any part thereof, except $4,500, which was paid to Klamath county, and the plaintiff herein given credit therefor May 23, 1927, and the balance of the $15,000 was wholly lost to school district No. 53 and to the plaintiff Klamath county school district.

At the election duly held on the 17th day of May, 1922, the county court of Klamath county duly submitted to the legal voters of said county the question whether or not chapter 265 of the General Laws of Oregon for 1921 should become effective in said county. Thereafter, on the 22d day of May, 1922, the county court duly canvassed the votes cast upon said measure at the election and found that a majority of said votes were in favor of making said act effective in said Klamath county, and thereafter, by an order duly entered the 27th day of May, 1922, said court declared said measure (that is, chapter 265 of the General Laws of Oregon for 1921) was carried and said act adopted and in full force and effect in Klamath county, Or., and Klamath county school district was thereby created.

The American Surety Company of New York, which we will hereafter term the defendant, contends that said chapter 265 is unconstitutional and void as repugnant to section 3, art. 8, of the Constitution of Oregon, which prescribes a uniform and general system of common schools of the state, and that therefore the plaintiff has no legal existence; that any judgment paid to the plaintiff by this defendant would not protect this defendant from being sued again for the same amount by school district No. 53 of Klamath county, Or., which defendant claims to be the real party at interest herein.

This appears to be stressed as the main question in the case. Chapter 265, General Laws of Oregon 1921, as in force during the time involved herein, provides, in part as follows:

"Section 1. In any county in which this act shall become effective there shall be three classes of school districts, known as city school districts, town school districts and county school districts, which shall be constituted and administered as hereinafter provided.

"Section 2. Each city or incorporated town, together with any contiguous territory attached to it for school purposes, having 1,000 or more children of school age, as shown by the latest school census, at any time shall constitute a city school district. Such district shall be maintained, operated and administered under the laws heretofore effective in districts of the first class; provided, that all laws heretofore effective in districts having more than 20,000 children of school age shall continue in full force and effect in any such district: and provided further, that all reports and appeals heretofore required or permitted by law to be made to the county school superintendent are henceforth respectively required or permitted to be made to the state superintendent of public instruction.

"Section 3. Each town or village, together with any contiguous territory attached to it for school purposes, having more than 500 and not more than 1,000 children of school age as shown by the latest school census, shall constitute a town school district; provided, that two towns or villages heretofore located in adjoining school districts of the second class shall be considered as a single town for the purpose of this section; provided, the voters of each such heretofore existing district shall at the next annual school election as heretofore provided by law for the consolidation of such districts vote to approve the creation of a town school district embracing both the aforesaid towns or villages.

"Section 4. All the territory of any such county not included in a city school district or a town school district shall constitute a county school district.

"Section 5. All school districts now existing or that shall be organized in pursuance of this act shall be to all intents and purposes bodies corporate, competent to transact business coming under their jurisdiction and sue and be sued. When suit is commenced against a district, service must be made on one of the directors. All the property, real and personal, heretofore belonging to all second and third class districts and joint districts heretofore existing within the corporate limits of each school district created by virtue of this act, shall become the property of said school district and be subject to control of the district school board of said school district chosen in accordance with this act or representatives appointed by said board. All indebtedness now outstanding, whether evidenced by bonds, warrants or otherwise of any heretofore second or third class district, or joint district coming under the supervision and control of the district school board by virtue of this act, shall be and become the obligations of said school district created by virtue of this act."

The act then provides for the officers of each school district created under the act, and for the election thereof, and makes various provisions regulating school districts.

Section 30 of chapter 265, General Laws 1921, provides that the act shall not become effective in any county until the same shall have been regularly submitted to the voters of such county at a general or special election, and a majority of the votes cast shall have been in favor of making such act effective; but the same shall become effective immediately in each county so adopting the same, providing no city having a population of more than 50,000, in any county voting hereon, shall participate in such election, and such city shall be exempted from such election.

The act further provides for the manner of submitting the measure to the legal voters of the county, and for the county court to canvass the votes and declare the result.

Section 12 of the act provides that the district school board shall employ a superintendent of schools for the district, and fix his term of office and compensation, after the expiration of the term of the county school superintendent at the time the act becomes effective. This act was amended by chapter 139, General Laws of Oregon 1927, which does not affect this case.

It is stipulated that the clerk of the school district No. 53 executed a bond as such clerk with the Fidelity & Deposit Company of...