State ex rel. Williams v. Musgrave

• Decision Date: 02 February 1962
• Docket Number: No. 8981,8981
• Citation: 84 Idaho 77,370 P.2d 778
• Parties: STATE of Idaho, on the relation of Joe R. WILLIAMS, State Auditor of the State of Idaho, Plaintiff-Appellant, v. Walter C. MUSGRAVE, Manager of the State Insurance Fund, State of Idaho; Glenn A. Coughlan and Joseph M. Imhoff, Jr., Defendants-Respondents.
• Court: Idaho Supreme Court

Page 778

370 P.2d 778

84 Idaho 77

STATE of Idaho, on the relation of Joe R. WILLIAMS, State Auditor of the State of Idaho, Plaintiff-Appellant, v. Walter C. MUSGRAVE, Manager of the State Insurance Fund, State of Idaho; Glenn A. Coughlan and Joseph M. Imhoff, Jr., Defendants-Respondents.

No. 8981.

Supreme Court of Idaho.

Feb. 2, 1962.

Rehearing Denied Feb. 2, 1962.

Frank L. Benson, Atty. Gen., Thos. Y. Gwilliam, Spec. Asst. Atty. Gen., E. G. Elliott, Asst. Atty. Gen., for appellant.

Elam & Burke, Hawley & Hawley, Boise, for respondent.

TAYLOR, Justice.

This action was brought by the state auditor (appellant) under authority of I.C. § 67-1001, subd. 13, to recover money alleged to have been paid out of the state insurance fund by the state treasurer on sight drafts drawn by the late Walter C. Musgrave, as manager of the state insurance fund, payable to the defendant (respondent) Glenn A. Coughlan, the proceeds of which were received by Coughlan and his law firm. The firm consists of Coughlan and Imhoff, attorneys at law.

The district court found that the moneys were lawfully paid and received and entered its judgment dismissing the action.

Plaintiff brought this appeal from the judgment.

In his brief appellant poses the issues raised as follows:

'1. Were the payments of the moneys made by the defendant Musgrave from that part of the State Insurance Fund not appropriated by the Legislature for administrative expenses and received by the defendant law firm, Coughlan and Imhoff, unlawfully made?

'2. May anyone except the Attorney General or his duly appointed assistants advise and represent the Manager of the State Insurance Fund and 'Fund officials' in the Courts and before the Industrial Accident Board?'

From January, 1947, to June, 1957--with the exception of a period when he was in the naval service--Coughlan had been employed as attorney for the state insurance fund, most of the time with the designation of assistant attorney general, and was paid a monthly salary. In June or July, 1957, he entered into an agreement with the manager of the fund to act as attorney for the fund in cases referred to him by the manager. He was to be compensated upon the basis of fees to be charged by him in each individual case. No retainer was agreed upon or paid.

Coughlan performed legal services for the fund pursuant to the agreement from August 1, 1957, to June 30, 1959. He was paid by means of sight drafts drawn by the manager of the fund, and directed to the state treasurer as drawee. The payments included expenses incurred by Coughlan in the performance of the services. Also in pursuance of the agreement, Coughlan acted for the fund in reclaiming from third parties moneys recoverable by the fund under rights of subrogation. In these cases he deducted his fees, on an agreed contingent basis, and his expenses from the recovery, and remitted the balance to the fund. Mr. Coughlan furnished his own office space, stenographic help, supplies and all overhead expenses. No taxes or other deductions were withheld from the payments made to Coughlan.

The statutes provide:

'There is hereby created a fund, to be known as the State Insurance Fund, for the purpose of insuring employers against liability for compensation under this Workmen's Compensation Law and the Occupational Disease Compensation Law and of securing to the persons entitled thereto the compensation provided by said laws. Such fund shall consist of all premiums and penalties received and paid into the fund, of property and securities acquired by and through the use of moneys belonging to the fund, and of interest earned upon moneys belonging to the fund and deposited or invested as herein provided.

'Such fund shall be administered by the state insurance manager without liability on the part of the state beyond the amount of such fund. Such fund shall be applicable to the payment of losses sustained on account of insurance and to the payment of compensation under the Workmen's Compensation Law and the Occupational Disease Compensation Law and of expenses of administering such fund.' I.C. § 72-901.

'There is hereby created the office of State Insurance Manager, elsewhere in this chapter referred to as Manager, whose duties it shall be to conduct the business of the state insurance fund, and the said manager is hereby vested with full authority over said fund, and may do any and all things which are necessary and convenient in the administration thereof, or in connection with the insurance business to be carried on by the manager under the provisions of this chapter. * * *' I.C. § 72-902.

'a. The manager shall have full power to determine the rates to be charged for insurance in said fund, and to conduct all business in relation thereto, all of which business shall be conducted in the name of the state insurance manager. * * *' I.C. § 72-903.

'The manager may, in his official name, sue and be sued in all the courts of the state, and before the industrial accident board in all actions or proceedings arising out of anything done or offered in connection with the state insurance fund or business relating thereto.' I.C. § 72-904.

'The manager may make contracts of insurance as herein provided and such other contracts relating to the state insurance fund as are authorized or permitted under the provisions of this chapter.' I.C. § 72-905.

'The manager may employ such assistants, experts, statisticians, actuaries, accountants, inspectors, clerks, and other employees as the department may deem necessary to carry out the provisions of this chapter and to perform the duties imposed upon him by this chapter.' I.C. § 72-906.

'The manager shall not, nor shall any person employed by him, be personally liable in his private capacity for or on account of any act performed or contract entered into in an official capacity in good faith and without intent to defraud, in connection with the administration of the state insurance fund or affairs relating thereto.' I.C. § 72-907.

'The state treasurer shall be the custodian of the state insurance fund, and all disbursements therefrom shall be paid by him upon warrants signed by the state auditor, or upon sight drafts signed by the state insurance manager as provided by section 72-927. The state treasurer shall give a separate and additional bond in an amount to be fixed by the governor, and with sureties approved by him, conditioned for the faithful performance of his duty as custodian of the state insurance fund. * * *' I.C. § 72-910.

Constitutional provision:

'No money shall be drawn from the treasury, but in pursuance of appropriations made by law.' Constitution, art. 7, § 13.

Plaintiff contends that the money in the fund when paid into the state treasury becomes state or public money, and that it cannot be drawn therefrom except upon an appropriation made by the legislature. The legislature at each biennial session, since the fund was established in 1917, has appropriated money from the state insurance fund for the administrative expenses of the manager. The payments to Coughlan were not made from the appropriation for the period involved, but were paid by the state treasurer on sight drafts drawn by the manager of the fund under authority of I.C. § 72-927, which provides as follows:

'The state insurance manager shall submit each month to the state board of examiners an estimate of the amount necessary to meet the current disbursements for workmen's compensation insurance losses and premium refunds to policyholders from the state insurance fund, during each succeeding calendar month, and when such estimate shall be approved by the state board of examiners, the state treasurer is authorized to pay the same out of the state insurance fund upon sight drafts drawn by the state insurance manager. At the end of each calendar month the state insurance manager shall account to the state board of examiners for all money so received, furnishing proper vouchers therefor.'

Plaintiff contends that the payments in question were neither 'workmen's compensation insurance losses' nor 'premium refunds' and therefore were not authorized by the foregoing statute.

For convenience and accounting purposes, and for many years, there has been established by the state treasurer a fund known as the 'Rotary Fund.' This fund is used for the purpose of making payments of 'compensation, pensions, doctor and medical payments, hospital and nurse, claimants' expense, burial and miscellaneous, drugs and applicances; investigations and hearing expense, premium refunds, deposit refunds, and National Guard.' The treasurer pays out moneys from the rotary fund upon sight drafts drawn by the manager of the insurance fund for the above purpose. The rotary fund is reimbursed from the state insurance fund upon monthly accounts and estimates of the needs of the fund for current disbursements. These accounting reports and estimates are submitted to the state board of examiners, through the state auditor as ex officio secretary of the board. When they are approved, the rotary fund is reimbursed by means of warrants drawn by the auditor pursuant to 'Rotary Fund Reimbursement Voucher' made and submitted to the auditor with the 'Record of Sight Drafts.' The warrants thus drawn by the auditor are then deposited with the treasurer, who credits the rotary fund with the amount of the warrants. Thus, the requirements of I.C. § 72-927 are satisfied. The withdrawals from the rotary fund paid to Coughlan were accounted for by the manager under the expense classification of 'Investigation and Hearings' as insurance losses.

Mr. Coughlan was not an employee of the state within the meaning of the standard appropriations act. I.C. Title 67, c. 36. His remuneration was not covered by the appropriation for 'salaries and wages.' His relationship to the fund was that of attorney and client, on a fee basis, which made him an independent contractor. Associated Indemnity Corp. v....