MacDougall v. Board of Land Com'rs. of State

• Citation: 48 Wyo. 493,49 P.2d 663
• Decision Date: 01 October 1935
• Docket Number: 1911
• Parties: MacDOUGALL v. BOARD OF LAND COM'RS. OF STATE OF WYOMING, ET AL
• Court: United States State Supreme Court of Wyoming

49 P.2d 663

48 Wyo. 493

MacDOUGALL v. BOARD OF LAND COM'RS. OF STATE OF WYOMING, ET AL

No. 1911

Supreme Court of Wyoming

October 1, 1935

APPEAL from the District Court, Laramie County; V. J. TIDBALL Judge.

Action by George D. MacDougall, a citizen and taxpayer, on behalf of himself and all others similarly situated, against the Board of Land Commissioners of the State of Wyoming and others. Judgment for defendants, and plaintiff appeals.

Reversed With Direction.

For the appellant there were briefs and the cause was argued orally by Harry B. Henderson, Jr., of Cheyenne.

The contract violates the Act of Admission, the State Constitution and Statutes. It is an unlawful expenditure of permanent land funds. The execution of the contract by the board is an unauthorized, illegal and ultra vires act. 40 C J. 893, 50 C. J. 1138; Act of Admission, Sec. 4; Article VII Sec. 2, 6, 7 and Article XVIII, Secs. 1, 2, and 6 of the Constitution of Wyoming; Secs. 91-106, 513, 516, 517, 522 and 91-808 of W. R. S.; State v. Snyder, 212 P. 758; Magnolia Petroleum Company v. Price, (Okla.) 206 P. 1033; State v. McMillen, (N. D.) 96 N.W. 310; Roach v. Gooding, (Ida.) 81 P. 642; Rowland v. State Land Board, (Ariz.) 207 P. 359. The laws of Wyoming place competent public officers at the disposal of the board, for the express purpose of performing the duties delegated to defendants, Shepard and Pendleton. Sec. 91-807, R. S.; 78-302, R. S.; 109-608, R. S.; 91-521, 807, R. S.; 2 Dillon on Municipal Corporations, (5th Ed.) Vol. II, page 1244; Orton v. State, 12 Wis. 567; Clough and Wheat v. Hart, 8 Kan. 487; Commissioner v. Ridings, 220 P. 96; County v. Gerrard, 12 Neb. 224, 11 N.W. 298; Miles v. County, 148 N.W. 959. The agreement provides for an unreasonable compensation. It contemplates encouragement of litigation in which the state is bound to accept the opinion and employ the services of foreign attorneys. It has a tendency to induce a neglect of official vigilance and duty. Peck v. Heurich, 157 U.S. 624, 42 L.Ed. 302; Geer v. Frank, (Ill.) 53 N.E. 965; Kelly v. Kelly, (Wisc.) 56 N.W. 637; 13 C. J. 443; 13 C. J. 448, 11 C. J. 248. The entire agreement is illegal and void. As to unlawful agreements to disburse state land funds, we cite the following authorities: In re Salaries of Commissioner and Employees of State Land Board, (Colo.) 133 P. 140; State v. Rice, (Mont.) 83 P. 875; State v. Maynard, (Wash.) 71 P. 775; Betts v. Land Office, (Okla.) 110 P. 766; School District v. State, (Ark.) 213 S.W. 961; Evans vs. Van Deusen, (Idaho) 174 P. 122; State v. Irvine, 206 U.S. 278; Ross v. Trustees, (Wyo.) 228 P. 642; McKinnon v. State, (Fla.) 70 So. 557; Hendricks v. Gamble, 217 Ill.App. 422. The Land Board is not authorized to employ counsel. 59 C. J. 174; Julian v. State, (Ind.) 23 N.E. 690; Cahill v. Board, (Mich.) 86 N.W. 950; State v. Fitzpatrick, (Idaho) 51 P. 112; Phelps v. Auditor General, (Mich.) 99 N.W. 374; State v. Clausen, (Wash.) 146 P. 630; State v. Horton, (Nev.) 34 P. 316; State v. Builbert, (Ohio) 51 N.E. 117; Herd v. State, (Ind.) 79 N.E. 916; Young v. State, (Wash.) 54 P. 36; Burchard v. State, (N. D.) 227 N.W. 564. The Land Commissioners had no authority to contract for the payment of contingent fees. State v. Company, (Miss.) 81 So. 124. Such agreements may be enjoined by a taxpayer. Grannis v. Board, (Minn.) 83 N.W. 495; Pierson v. County, (S. Dak.) 134 N.W. 212; Murphy v. Swanson, (N. Dak.) 32 A. L. R. 82; State v. Fry, (Kans.) 95 P. 392; Board v. Workman, (Ind.) 103 N.E. 99; Clark v. State, (Ind.) 117 N.E. 965; Storey v. Murphy, (N. D.) 81 N.W. 23; Edmondson v. Deckebach, (Ohio) 102 N.E. 408; Heath v. Albrook, (Iowa) 98 N.W. 619. The Constitution prohibits the creation of public indebtedness by the state exceeding one per centum on the assessed value of the taxable property. Article XVI, Sec. 1 and Sec. 2 of the Wyoming Constitution.

For the respondents there were briefs by Chiles P. Plummer and Clyde M. Watts, and by Ray E. Lee, Attorney General; Thos. F. Shea, Deputy Attorney General, and Wm. C. Snow, Assistant Attorney General, all of Cheyenne, and oral arguments by Messrs. Plummer, Watts and Lee.

The funds referred to have never been a part of the permanent land fund or any other fund, and the contract is not in violation of the Act of Admission or any provision of the constitution and laws of the State of Wyoming. Contracts of this class have been upheld by the courts. Miles v. County, 148 N.W. 959; Shinn v. Cunningham, 120 Iowa 383; Brown v. Bigne, 21 Ore. 260; County v. Layman, 145 Ill. 138; Fowler v. Collan, 102 N.Y. 395; Church v. Hadley, (Mo.) 39 L. R. A. (N. S.) 248; Disbrow v. County, (Iowa) 93 N.W. 586. The agreement to compensate respondents out of sums collected does not constitute a diversion of the permanent school fund within the meaning of constitutional prohibitions. State v. Davis, (Kans.) 217 P. 905; State v. Rhodes, 4 Nev. 312; United States v. Swope, 16 F.2d 215 (8th Cir.). On questions of construction as to statutes and constitutional provisions, see Den v. O'Hanlon, 21 N.J.L. 582; Zancanelli v. Central Coal & Coke Company, (Wyo.) 173 P. 981; C. & N.W. Ry. Co. v. Hall, 46 Wyo. 380; 12 C. J. 717. The word "proceeds" is commonly used to designate the source rather than the extent of moneys received. The phrase "moneys arising from" has the same purpose. Hunt v. Williams, (Ind.) 26 N.E. 177; Ross v. Trustees, (Wyo.) 228 P. 642; The Governor v. McEwen, 5 Humphreys, (Tenn.) 241. As to the employment of counsel, we cite the Act of February 18, 1935, which expressly authorizes contingent contracts with accountants and attorneys in cases of this class. This statute eliminates the question as to whether or not the contingent compensation feature of the contract renders it illegal as opposed to public policy. Parchen v. Chessman, (Mont.) 142 P. 631; Brown v. Anderson, 17 Ky. 198; Davis v. Commonwealth, (Mass.) 41 N.E. 292. In addition to the foregoing authorities, we cite: County v. Layman, et al., 33 N.E. 1094; City v. Dykeman, 17 N.E. 587; Knight v. Town of Ashland, 21 N.W. 65; Kelley v. County Treas., 46 P. 299; Reed v. Gormley, 91 P. 1093; Power v. County Treasurer, 55 P. 796; Lassen County v. Shinn, 26 P. 365.

BLUME, Justice. KIMBALL, Ch. J., and RINER, J., concur.

OPINION

BLUME, Justice.

On December 8, 1933, the Board of Land Commissioners of this state, as party of the first part, entered into a contract with Shepard-Pendleton & Company, as party of the second part, sometimes herein referred to as the auditing company, for the investigation, etc., of certain debts thought to be due to the state under oil, gas and other mineral leases, the contract reciting that it is the desire of the state to employ the auditing company to ascertain whether true and accurate accountings have been made to it, and "whether the methods used in ascertaining the quantity and quality of the oil, or gas produced" have been accurate. Among other things, the contract provides:

"FIRST. The Parties of the Second Part hereby agree to proceed diligently to check operations now existing and heretofore used in determining the quantity and quality of oil, gas and/or gasoline produced from the said real properties and to audit such producing records as may be deemed advisable by the Parties of the Second Part, in order to determine as soon as possible whether or not the persons or companies that have produced or purchased oil, gas and/or gasoline from said above described real property have accounted for lessor's royalties for all of said production, and as to whether or not said lessees have damaged the Party of the First Part in carrying on their operations under the leases hereinbefore referred to, and to render to the Party of the First Part a detailed report as to such findings, and render their opinion as to whether a cause of action on the part of the Party of the First Part exists against such lessee or lessees, for damages by reasons of failure or neglect on the part of any lessee or lessees to properly carry out and perform the terms of its or their lease or leases covering such oil and gas properties.

SECOND. The Party of the First Part hereby agrees to pay a contingent fee to the Parties of the Second Part for their said services as follows:

25% of the first $ 1,000,000.00 which may be recovered on account of any such claims, damages, demands or causes of action. 16.66% of any and all recoveries had of any sums in excess of $ 1,000,000.00.

The term recoveries includes all sums or things of value which may be received, had or recovered either as a result of settlement of claims, damages, demands or causes of action against any lessee or lessees or as a result of litigation against any lessee or lessees.

THIRD. The Party of the First Part shall and it hereby does give to the Parties of the Second Part such power of attorney or authority as they shall require in rendering their service as aforesaid, and in particular, said Party of the First Part shall and it hereby does give to the Parties of the Second Part full and complete authority and makes them its agents and does hereby constitute them its attorney-in-fact with authority to demand, inspect, take copies of and investigate all books, records and methods now or heretofore or hereafter used by said lessee, and to take samples.

FOURTH. The Parties of the Second Part hereby agree to pay all costs and expenses incident to their services as aforesaid and the Party of the First Part shall not be liable for any services rendered or expenses incurred by the employees or agents of the Parties of the Second Part.

FIFTH. The Parties of the Second Part further agree that, upon the completion of their preliminary investigation under the terms of this contract, they will...