Okla. City v. Century Indem. Co.

• Decision Date: 06 October 1936
• Docket Number: Case Number: 26884
• Citation: 178 Okla. 212,62 P.2d 94,1936 OK 589
• Parties: OKLAHOMA CITY v. CENTURY INDEMNITY CO.
• Court: Oklahoma Supreme Court

1936 OK 589

62 P.2d 94

178 Okla. 212

OKLAHOMA CITY v. CENTURY INDEMNITY CO.

Case Number: 26884

Supreme Court of Oklahoma

Decided: October 6, 1936

Syllabus

¶0 1. MUNICIPAL CORPORATIONS - Municipal Offices Created Only by Legislation Either Immediate or Delegated.

Municipal offices can only be created by legislation. This may be either Immediate, when done by the State Legislature, or delegated, as when the municipal corporation is expressly empowered by charter or general law to create the office for itself.

2. SAME - Creation of Office of Deputy City Clerk by Mayor and Council Held Authorized by Charter.

The provision of the charter of the city of Oklahoma City which provides, "The board of commissioners (now mayor and council) * * * may create such other offices necessary to the proper and efficient conduct of the affairs of the city," authorizes the creation of the office of deputy city clerk.

3. PRINCIPAL AND SURETY - Bond Executed by Deputy City Clerk Held Official Bond Required by Statute.

A bond executed by a deputy city clerk whereby the surety binds itself to pay the city such pecuniary loss as the city shall sustain through the fraud, dishonesty, forgery, theft, embezzlement or wrongful abstraction on the part of the principal while in the performance of his duties in any position in the service of the city, is an official bond required by section 6353, O. S. 1931.

4. SAME - Surety on Deputy City Clerk's Bond not Relieved From Liability Because of Conditions of City Clerk's Bond.

The fact that the city clerk is required to and does give a bond as required by law conditioned for the faithful performance of his official duties, and that such bond covers defalcation of his deputy, does not relieve the surety on the bond of the deputy city clerk from liability for acts and defaults of the deputy city clerk covered by the bond of such deputy.

Appeal from District Court, Oklahoma County; Clarence Mills, Judge.

Action by the City of Oklahoma City against the Century Indemnity Company and another. From judgment for defendant named, plaintiff appeals. Reversed and remanded.

Harlan Deupree, Municipal Counselor, and A.P. Van Meter, Asst. Municipal Counselor, for plaintiff in error.

Hal C. Thurman and Harold C. Thurman, for defendant in error.

RILEY, J.

¶1 Plaintiff city sued K.D. Harris and the Century Indemnity Company to recover on a surety bond in the principal sum of $1,000, given by Harris as deputy city clerk of the city of Oklahoma City.

¶2 The bond sued upon designates the parties as K.D. Harris, "hereinafter called employee", as principal; the Century Indemnity Company, the surety, and city of Oklahoma City, the employer, and binds the principal and surety to pay the city the penal sum of $1,000. It then recites:

"Whereas, the employee has been appointed to the position of Deputy City Clerk, in the service of the employer, and has applied to the Century Indemnity Company for this bond;"

"It is hereby covenanted and agreed that the surety (for and in consideration of a premium based upon an annual rate of 50 cents per One Hundred Dollars of Suretyship paid or to be paid to it by the Employer), hereby binds itself to pay to City of Oklahoma City (as Employer) such pecuniary loss as the Employer shall sustain of money or other personal property (including that for which the employer is legally liable) through the Fraud, Dishonesty, Forgery, Theft, Embezzlement, or Wrongful Abstraction, on the part of the Employee directly or in connivance with others while in the performance of his duties in any position in the service of the Employer, during the period commencing with the 16th day of July, One Thousand Nine. Hundred and twenty-eight, at Twelve O'clock Noon, Standard time."

¶3 Then follow certain provisions relative to the application of any recovery of any loss, other than reinsurance or coinsurance. Then the following:

"Second, Upon the discovery by the Employer of any loss, the Employer shall within ten days after such discovery deliver notice thereof to the Surety at its Home Office in Hartford, Conn., and within three months after such discovery the Employer shall file with the Surety at its Home Office, a written statement of claim giving particulars of such loss. The surety shall have Two months after claim has been presented in which to verify and pay same, during which time no legal proceedings shall be brought against the surety as to the claim, nor at all as to that claim after the expiration of Sixteen months from the date of discovery of loss. If any limitation embodied in this bond is prohibited by any law controlling the construction thereof, such limitation shall be deemed to be amended so as to be equal to the minimum period of limitation permitted by such law."

¶4 Then follows a provision for terminating the bond by written notice by the employer to the surety or 30 days' written notice by the surety to the employer, or by the retirement of the employee from the service of the employer, or upon discovery of any loss through the employee.

¶5 And then:

"Fourth. The surety shall be liable for those losses only which shall be discovered during the term the bond is in force, or, within fifteen months after the termination thereof."

¶6 The bond was dated July 16, 1928.

¶7 The amended petition, after certain formal allegations, alleged: That said K.D. Harris entered into the employment of the city on or about July 16, 1928, and remained continuously in said employment in such capacity to and including December 31, 1931, at which time he left the employ of said city. The petition then alleged that there had been a breach of the conditions of said bond in

"That during the time that said defendant Harris was so employed by said city, he collected certain sums of money belonging to said city and paid to him as deputy city clerk in the special assessment department of said city for which he failed, neglected and refused to account, and in certain instances, though taxes were not in fact paid to said city, said defendant Harris caused the taxes to be shown as paid upon the tax records of said city and upon the records in the office of the county treasurer of Oklahoma county upon certain properties which are now in the hands of innocent purchasers so that it is not possible to correct said tax records, and that in these manners said defendant Harris caused loss and damage to this plaintiff in the sum of $2,164.72. * * *"

¶8 It is then alleged in substance that a full, true, and correct detailed statement of the losses was prepared and served upon the surety, and that on August 14, 1933, a statement and notice of claim was sent by registered mail to the surety. Then follow some 14 separate paragraphs alleging separate acts of fraud, embezzlement, etc., making up the aggregate sum of $2,164.72, some of which were false entries on the books of the city pertaining to the payment of special improvement assessments against property owned by Harris whereby the books of the city and of the county treasurer were made to show paid certain special assessments or installments thereof against said property, when in truth and in fact no such payments had been made, and that loss to the city arose by the transfer of said property to innocent purchasers. Other items were in substance that Harris had collected paving or other special assessments from the owners of property, and failed and refused to account for same. The alleged facts as to each item were pleaded in great detail, including the manner in which Harris had managed to conceal his wrongful acts until a complete audit of his accounts was made.

¶9 As to the discovery of such matters, the petition alleged:

"Plaintiff further alleges that it was not until on or about December 14, 1931, that any of the officers, agents or employees of the plaintiff had reason to believe that any of the matters described in said paragraphs numbered VI to XIX, inclusive, had transpired. That on or about said last referred to date, M. Lowenstein complained to the city auditor about not receiving proper credit for certain payments made to said K.D. Harris, and other parties, not known to this plaintiff, also complained and that the city auditor, upon receiving said complaints, and having these matters brought to his attention, conveyed such information to the city manager. That on or about December 14, 1931, as soon as possible after receiving said information, the city manager instructed the city auditor to hire two additional employees and to proceed with an audit of the books and accounts and records in the office of the city clerk and in the office of the county treasurer. This audit was conducted as rapidly as possible and was completed on or about August 1, 1933, and delivered to the city council on August 1, 1933. * * * That notice and claim was filed by the city attorney with the Century Indemnity Company as soon as possible after the amount of the losses was definitely ascertained and fully discovered and within the time set forth in said bond in the manner as hereinbefore alleged."

¶10 The petition further alleged in substance that the bond sued upon was required by sections 6239 and 6353, O. S. 1931, and that the city council required Harris to execute said bond in order that said section might be complied with and that the bond was executed for the purpose of meeting the requirements of said sections. The petition finally alleged in substance that if the statement and notice of claim were not filed within the time and in the manner required by the bond, the defendant waived the requirement of the bond on August 17, 1933, by, denying liability under the bond on the ground that the losses had not been discovered within 15 months from the termination of said bond, in a letter addressed to the city's counselor, as follows:

"Our bond file discloses that the bond terminated. January 1, 1931, as the city clerk notified us that Mr. Harris' employment had terminated at that time.

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