Case Name: COLUMBIA INSURANCE CO. v. BOARD OF EDUCATION OF JOINT SCHOOL DIST. NO. 1, COUNTIES OF PONTOTOC, JOHNSTON, AND COAL
Court: Oklahoma Supreme Court
Jurisdiction: Oklahoma
Decision Date: 1939-01-10
Citations: 185 Okla. 292
Docket Number: No. 27420
Parties: COLUMBIA INSURANCE CO. v. BOARD OF EDUCATION OF JOINT SCHOOL DIST. NO. 1, COUNTIES OF PONTOTOC, JOHNSTON, AND COAL.
Judges: WELCH, GIBSON, HURST, and DAN-NER, JJ., concur.
Reporter: Oklahoma Reports
Volume: 185
Pages: 292–301

Head Matter:
COLUMBIA INSURANCE CO. v. BOARD OF EDUCATION OF JOINT SCHOOL DIST. NO. 1, COUNTIES OF PONTOTOC, JOHNSTON, AND COAL.
No. 27420.
Jan. 10, 1939.
Rehearing Denied June 13, 1939.
Application for Leave to File Second Petition for Rehearing Denied June 27, 1939.
Rittenhouse, Webster & Rittenhouse, for plaintiff in error.
Brunson & Brunson, for defendant in error.

Opinion:
OSBORN, C. J.
This action was instituted in the district court of Pontotoc county by J. E. Morrison, W. H. Holland, and W. B. Ivey, composing the board of education of joint school district No. 1 (in Pontotoc, Coal, and Johnston counties), against Columbia Insurance Company on two policies of fire insurance. The cause was tried to a jury, and a verdict was returned in favor of plaintiff. From a judgment thereon, defendant has appealed. The parties will be referred to as they appeared in the trial court.
The evidence discloses that during the month of April, 1934, the plaintiffs were desirous of procuring some fire insurance upon the school property. The funds provided for the fiscal year 1933-34 for payment of premiums for fire insurance had been exhausted. The board had prepared its estimate for the fiscal year 1934-35, in which it requested an appropriation sufficient to pay an annual premium upon the policies. The teacher of the school, one Cole Under-hill, informed the board that he believed he could secure the insurance on credit, and was authorized by the board to do so. Un-derhill solicited the insurance from the Howard-Thompson Agency at Ada, which was a general agency of the defendant company, and made arrangements through said agency for the procurement of the insurance on credit. On April 11, 1934, two policies were issued, one on the schoolhouse and contents for $2,100, and one on the teacherage for $400. Each was for a term of one year.
The policies were delivered to Underhill, who in .turn delivered them to Mr. Ivey, the clerk of the board. The policies were examined by two members of the board and accepted by them. On May 7, 1934, the schoolhouse, the teacherage, and the contents of both buildings were totally destroyed by fire. Proof of loss was furnished to defendant. On October 17, 19'Ü4, the board tendered to defendant a warrant in the sum of $58.92, the amount of the premiums on both policies, which tender was refused. Upon the failure of defendant to indemnify the school district for the loss sustained by the fire, this action was instituted.
For reversal of the judgment it is urged, first, that since the appropriation was exhausted for the fiscal year in which the policies were issued and no funds were 'on hand at that time for payment of the premiums, the contracts were violative of section 26, art. 10, of the Constitution and section 5955, O. S. 1931 (62 Okla. Stat. Ann. sec. 479), prohibiting the incurring of any indebtedness in excess of the income and revenue provided for the fiscal year, and are null and void. A number of authorities are cited in the brief construing saM section of the Constitution, but each of these cases involved an attempt to enforce a liability against a municipality upon a contract entered into in violation of said constitutional provision.
Plaintiffs insist that the contracts do not violate the above-cited constitutional! and statutory provisions, since an estimate had been made and subsequently an appropriation was provided for payment in full of the premiums, and that said funds should be treated as "on hand" when the insurance contracts were entered into. The various authorities relied upon to establish this proposition are not in point. In this case the insurance policies became effective approximately three months before the beginning of the fiscal year in which the funds were provided for payment of premiums. It is obvious that premiums on policies covering the school property during the year in which funds were properly provided would be a valid charge against the district. The loss in this case, however, occurred before the beginning of such fiscal year. Accordingly, we will treat the premiums on the insurance for the period the same was in force prior to the beginning of the fiscal year 1934-35 as an invalid charge against the district by virtue of the constitutional and statutory provisions hereinabove referred to.
The exact question here presented has not been before this court, but in our former decisons we find announced the principles which are controlling.
In the case of Fairbanks-Morse Co. v. City of Geary, 59 Okla. 22, 157 P. 720, this court denied to plaintiff the right to recover, by replevin, certain machinery furnished to the city under a contract viola-tive of the above cited constitutional and statutory in'ovisions, for the reason that the contract was illegal, and that the court would not "use its power, or lend its offices to aid them, but will leave them where it finds them."
In the case of Board of Commissioners v. Western Bank & Office Supply Co., 122 Okla. 244, 254 P. 741, plaintiff entered into contracts with the board of county commissioners of McCurtain county to furnish certain furniture, fixtures, and supplies to the county. The contracts were violative of the above-cited constitutional and statutory provisions. It was sought to recover a judgment against the county for the value of the goods sold and in the alternative for a recovery of the goods. It was held that plaintiff was not entitled to a judgment against the county, nor to a return of the property. It was therein said:
" It is so fundamental that it needs no citation to establish it — that all persons dealing with municipalities do so at their own peril. They are charged with knowledge of the limitations placed by law upon the authority of the officers of the same. Under the law of this state, any contract made as in the instant case, where the revenue has not already been provided for, paying the same during the fiscal year in which the contract is made, is absolutely void; that is, void to the extent that the courts will not entertain any alleged cause of action to render a judgment against the municipality, and the only remedy which the statute provides or permits is an action against the officers contracting such pretended indebtedness. This remedy against the officers is by the law written into every such contract, and is 'expressio unius est exclusio alterius,' so far as resorting to any other remedy. The purpose of this provision of the statute is both penal and remedial. It is in the nature of a penalty against the officers for the purpose of deterring them from entering into such pretended agreements. It is in the nature of a remedy in that it permits the person furnishing such goods, wares, merchandise, or labor to recover through the courts solely against the officers so prostituting their official authority.
"As said supra, section 8639 makes the attempt to enter into such contract a crime. Persons who have goods, wares or merchandise, or labor for sale to municipalities are charged with knowledge of how far the officers can go. If, in their zeal to vend their wares, they pay no attention- to the limitation of the officials with whom they deal, they do so at the risk of their ability to recover from the officers or of donating what they deliver to such municipality, und'T such contracts, and remedy in the courts to recover in any wise, save and except against the officers who entered into such an agreement, is denied. "
The doctrine so announced was followed in the case of J. B. Klein Iron & Foundry Co. v. Board of County Commissioners of Canadian County, 178 Okla. 72, 61 P.2d 1055, wherein it was sought to recover from the county, by replevin, certain materials furnished to the county under a contract violative of the above-cited provisions of the Constitution and statutes. It was pointed out that the contract was void only as to the municipality.
Although the facts in these cases are dissimilar to the facts involved herein, the principle is the same. The issue of invalidity of the contract is raised by the defendant insurance company, but by raising such issue said defendant attempts to escape a contractual liability, voluntarily assumed, and in this respect seeks affirmative relief through the law. It assumed said contractual liability with full knowledge of the law and the facts. If any part of the premiums charged for the policies may not be collected from plaintiff; school district, defendant's sole remedy is to proceed against the members of the board, by civil action, for the collection of such amounts. No other remedy is available. It may not escape its contractual liability by asserting the invalidity of the contracts. They are invalid only as to the school district.
Defendant further contends that the policies are void for lack of mutuality. In the light of the above cited authorities, it is obvious that the contention is without merit.
It is also sought to reverse the judgment of the trial court on the ground that "there was no regular or special meeting of the school board at which the purchase of said policies was authorized or approved." and the purported contracts of insurance sued on were unenforceable and void. The evidence is to the effect that all three members of the board were present and authorized Underhill, the teacher, to procure the insurance. It is also shown that two members of the board examined and approved the policies after they were delivered. The fact that no written minutes were made regarding the transaction of this business docs not operate to invalidate these contracts.
Judgment affirmed.
WELCH, GIBSON, HURST, and DAN-NER, JJ., concur.