State ex rel. Woods v. Cole

Decision Date29 September 1936
Docket NumberCase Number: 25330
Citation178 Okla. 567,63 P.2d 730,1936 OK 565
PartiesSTATE EX REL. WOODS v. COLE
CourtOklahoma Supreme Court
Syllabus

¶0 1. MUNICIPAL CORPORATIONS - Taxpayer's Action Based on Illegal Contract of Employment - Necessary Allegations as to Illegality.

In an action by a taxpayer to recover double penalty from city officers and an individual employee of the city under contract, where such action is based upon the alleged illegality of the contract on account of lack of authority of the city to make such contract, when the petition of plaintiff does not affirmatively allege and show the contract to be so illegal and beyond the power of the city, then a demurrer to such petition is properly sustained.

2. SAME - Powers of City Acting in Proprietary Capacity - Employment of Persons to Protect City's Interests in Oil Producing Lands.

Where a city is exercising the rights of a proprietor in the management of its oil producing lands, its powers as to the employment of persons to protect its interests are not so strictly limited as when the city is acting in its governmental capacity, but its officers and council resemble the directors and officers of a private corporation, and in large degree their powers are governed by the rules applicable to private corporations.

3. SAME - Scope of Implied Powers.

A municipal corporation acting in its proprietary capacity, in addition to powers expressly granted, has such others as are necessarily implied or incidental to those granted, and also all powers indispensable to attainment and maintenance of declared objects and purposes.

Appeal from District Court, Oklahoma County; Jesse J. Worten, Assigned Judge.

Action by W.H. Woods, in the name of the State, against Oklahoma City, the city officials, and H.E. Cole. From a judgment sustaining defendants' demurrer to plaintiff's petition, plaintiff appeals. Affirmed.

W.H. Woods, for plaintiff in error.

Embry, Johnson, Crowe & Tolbert and Armstrong & Murphy, for defendants in error.

Joseph C. Stone, amicus curiae.

WELCH, J.,

¶1 The plaintiff here seeks to recover judgment for himself and for the city against the governing officers of the city, and Cole, under the penalty statutes, sections 5964 and 5965, O. S. 1931, upon the theory that the said city officials entered into an illegal contract of employment with Cole, resulting in his illegally receiving a portion of sums ascertained by him to be due, and collected by him for the city.

¶2 The essential facts are as follows: The city owned various lands which in past years it had leased for oil and gas to various persons, upon the usual terms as to royalty to be paid the city out of the oil recovered. Numerous producing wells had been drilled and much royalty had been collected by the city. The field in and adjacent to the city was very productive, there being many hundreds of producing wells.

¶3 In August, 1933, it was evidently the conclusion of the governing officers of the city that the usual collection methods had probably not brought in to the city its full share of royalty collections on oil produced from its lands. The oil production had not been uniform, constant, and regular. Production had been curtailed under state conservation and proration. Wells had produced at different capacities at different times. Wells had been closed down at times and permitted to produce at times. Some difficulties in the field had resulted in martial law, and some confusion had existed as to oil produced, and as to production reported throughout the field.

¶4 On August 5, 1933, the contract here involved was entered into. It was drafted at length, approved by the municipal counselor, and executed by the city and Cole. The terms were, in substance, that the city employed Cole upon a contingent basis to investigate, search for, and if possible to discover back oil production upon which the city had not been able to collect royalty, and to collect any such back royalty for the city. There were many city lots under lease, and several other tracts of land which were specifically excepted from the contract, indicating that as to those items the city was able to handle the royalty matter with its ordinary officers, employees, and facilities. The contract with Cole was limited to apply only to back oil productions, that is, to oil produced prior to May 31, 1933, indicating no desire on the part of either Cole or the city that Cole should work on current royalty collectible by the city in the usual course of business through its own regular facilities. The contract expressly recognized the fact that Cole had special facilities for the discovery of unreported oil runs, and for the collection of back royalties. The contract provided that Cole should receive 25 per cent. of all such back collections, made by him for the city, within the limits of the contract.

¶5 Reference in the briefs is made to the fact that Cole had an organization of trained men, and had specially prepared himself to render such services as this to royalty owners, but aside from any such statements in the briefs, his facilities for doing the work are recognized in the contract, and demonstrated by the fact that he did make substantial collections of such back royalty for the city. These collections were, by resolution of the city officers, divided three-fourths to the city and one-fourth to Cole, agreeable to the terms of the contract.

¶6 It is not disputed that the city benefited greatly from the contract, nor is it contended specifically that the compensation paid was more than Cole's services were worth. The plaintiff's case is based upon the theory that the contract was illegal, and everything done under it was illegal for lack of authority in the city to so contract.

¶7 It is not contended that there was any actual fraud practiced in the making of the contract. The petition does refer to the contract as being "a certain unlawful and fraudulent contract," and as being "fraudulent in law," and as being in open violation of the provisions of the Constitution of the state. The petition further states that Cole secured the contract "by the practice of deceit and fraud on the part of the defendant, Cole, on the six defendant members of the city council." It will be noticed that these statements are pure conclusions. No facts whatever are pleaded showing fraud or deceit by anyone. And from a reading of the entire petition it is apparent that these statements are but complementary to plaintiff's allegations and contention that the contract was illegal for lack of authority in the city to make it.

¶8 Of course, if the contract was illegal, then the plaintiff would be entitled to recover, under the appropriate statutory enactments, without showing actual fraud.

¶9 The plaintiff urges that, since the city had its governmental officers, and its auditor, and its policemen and detectives, and its attorney, no authority existed to employ Cole in the capacity indicated by the contract.

¶10 In determining the question we must bear in mind that the city was here acting in its proprietary capacity as distinguished from its governmental capacity.

¶11 In Audit Company of New York v. City of Louisville, 185 Fed. 349, it was determined that:

"Where a city is exercising the rights of a proprietor in the management of its property, its powers are not so strictly limited as when acting in its governmental capacity, but its council and officers resemble the directors and officers of a private corporation, and in large degree the powers of these agents and the responsibility of the city for their acts are governed by the rules applicable to private corporations."

¶12 In Illinois Trust & Savings Bank v. City of Arkansas City, 76 Fed. 271, 22 C. C. A. 171, 34 L. R. A. 518, it was said:

"A city has two classes of powers, - the one legislative, public, governmental, in the exercise of which it is a sovereignty and governs its people; the other, proprietary, quasi private, conferred upon it, not for the purpose of governing its people, but for the private advantage of the inhabitants of the city and of the city itself as a legal personality. In the exercise of the powers of the former class, it is governed by the rule here invoked. In their exercise it is ruling its people, and is bound to transmit its powers of government to its successive sets of officers unimpaired. But in the exercise of the powers of the latter class it is controlled by no such rule, because it is acting and contracting for the private benefit of itself and its inhabitants, and it may exercise the business powers conferred upon it in the same way, and in their exercise it is to be governed by the same rules that govern a private individual or corporation. (Citation of cases omitted.)"

¶13 This court recognizes the distinction between proprietary and governmental capacity, and quoted the above statement with approval in Fretz v. City of Edmond, 66 Okla. 262, 168 P. 800; and in City of Pawhuska v. Pawhuska Oil & Gas Co., 118 Okla. 201, 248 P. 336. That distinction is also recognized in Maney v. Oklahoma City, 150 Okla. 77, 300 P. 642, and in Oklahoma City v. Baldwin, 133 Okla. 289, 272 P. 453.

¶14 We know, of course, that Oklahoma City has the right to make a contract, to take and acquire property, and to hold, lease, convey, or otherwise dispose of any of its property, real or personal, and has such other powers, rights, and privileges as are granted by its charter or by the Constitution and laws of the state. These rights and powers were recognized in Ruth v. Oklahoma City, 143 Okla. 62, 287 P. 406, where it was held in paragraph 3 of the syllabus:

"The city of Oklahoma City is authorized by its charter to hold, lease, mortgage, convey or otherwise dispose of any of its property, real or personal, within and without the limits of said city, and is granted such other powers, rights, privileges, franchises and immunities as are granted and conferred by any other parts
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