Case Name: STATE ex rel. WOODS v. COLE et al.
Court: Oklahoma Supreme Court
Jurisdiction: Oklahoma
Decision Date: 1936-09-29
Citations: 178 Okla. 567
Docket Number: No. 25330
Parties: STATE ex rel. WOODS v. COLE et al.
Judges: BUSBY and CORN, JJ., and C. W. CAMERON and A. G. C. BIERER, Jr., Special Justices, concur.
Reporter: Oklahoma Reports
Volume: 178
Pages: 567–575

Head Matter:
STATE ex rel. WOODS v. COLE et al.
No. 25330.
Sept. 29, 1936.
Rehearing Denied Nov. 24, 1936.
Second Petition for Rehearing Denied Jan. 5, 19137.
AV. IT. AVoods, for plaintiff in error.
Embry, Johnson, Crowe & Tolbert and Armstrong & Murphy, for defendants in error.
Joseph C. Stone, amicus curiae.

Opinion:
WELCH, J.,
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 59G4 and 5905, 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.
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.
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. AA^ells had produced at different capacities at different times. AVells 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.
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.
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.
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.
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, Coie, 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.
Of course, if the contract was illegal, then the plaintiff would be entitled to recover, under the appropriate statutory enactments, without showing actual fraud.
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 Oole in the capacity indicated by the contract.
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.
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."
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 á 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.)"
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.
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 of its charter or by the Constitution and laws of the state, and it is further granted all other powers that may be given it by the Constitution and laws of the state. "
In this state cities are given wide powers of engaging in business or enterprises. Section 6, art. 18, Constitution; section 6350, O. S. 1931.
It seems clear that from exx>ressed grants of power there may arise implied powers to do the things necessary and proper to the complete enjoyment of the powers expressly granted. Since the city had the right to lease its lands for oil and gas, it had the right to collect the stipulated royalties, and it would seem to follow that it had the right to do whatever was reasonably necessary, under the existing conditions, to collect the royalties and thereby fully enjoy the right to lease.
Good business would dictate that a city should manage any enterprise entered into with economy, but nothing is presented to limit the city only to its governmental officers, in searching for and collecting its back oil royalties on unreported oil runs when in keeping with good business management additional diligence and effort is indicated to be necessary to avoid great loss. There is no express grant of power to enter into such a contract as the Oole contract, nor express restrictions from so doing.
This court held in Board of Education v. Thurman, 121 Okla. 108, 247 P. 996, that a municipal corporation has power and authority to employ an attorney when necessary, in the absence • of express restrictions, and that this authority is implied from the power to make contracts and to own property. In that case the municipality had no regular attorney, it is true, but in Board of County Commissioners v. Waldrep, 150 Okla. 228, 1 P. (2d) 711, we upheld the right of a county to employ an attorney to represent the county in federal court, since the law did not expressly make it the duty of the regular county attorney to appear for the county in federal court. It is apparent there that while there was no express authority, neither was there any express denial of such authority, and the power was held to be necessari'y implied. It is held that as to certain services, and generally, the county cannot employ an attorney as in Board of Com'rs v. Jones, 4 Okla. 341, 51 P. 565, and Board of County Com'rs v. King, 147 Okla. 34, 294 P. 101, but that is true on 'account of affirmative provisions of law as pointed out in those cases. So in Board of Education v. Thurman, supra, it was held as to certain services there was no authority to employ an attorney on account of affirmative provisions of the law.
In Treeman v. City of Perry, 11 Okla. 66, 65 P. 923, the action of the city council in employing an attorney was upheld. The court there noticed the general grants of authority to cities and then said:
"This last section contains a pretty broad grant of power, but even conceding, for the sake of argument (but we do not admit it as a fact) that it does not embrace express authority to employ an attorney, it must also be admitted that the council are neither expressly nor impliedly prohibited from doing so, and the general rule is that a city council may employ an attorney by ordinance to assist the city attorney, unless expressly or by clear implication prohibited in its charter or by some act of the Legislature."
Further in the body of the opinion is discussed the general rule of authority of a municipality as to contracts of employment, in the absence of express prohibition, or unless prohibited from so doing by clear implication.
That general rule is also followed in City of Holdenville v. Lawson, 40 Okla. 38, 135 P. 405.
A town may enrploy an engineer to draw plans. Town of Hominy v. McFarland, 55 Okla. 419, 154 P. 1128.
The District Court of Appeals of California in Miller v. Boyle, 184 P. 421, held that a city under its implied powers could contract with architects.
In Child v. Board of Com'rs of City of Newark (N. J.) 151 Atl. 203, the city having power to lease lands, it was held to also have the authority and power to employ the necessary re'al estate brokers, and in Stewart v. City of Council Bluffs (Iowa) 12 N. W. 718, a contract for special services was held not beyond the power of the city to make.
The rule is well stated by the Supreme Court of Connecticut, in Bridgeman v. City of Derby, 132 Atl. 25, wherein it was held:
"Municipal corporations, in addition to powers expressly granted, have 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."
In the body of the opinion it was forcefully pointed out that contracted employments which at one time might not be necessary might under different circumstances or changed conditions become necessary or indispensable to the attainment of desired and declared objects and purposes.
It has been held in some states that a city may contract with a private person as to collection of back taxes and as to discovery of unlisted taxable property. See City of San Antonio v. Raley (Tex. Civ. App.) 32 S. W. 180, City of Richmond v. Dickinson (Ind.) 58 N. E. 260, and City of Richmond v. Clifford (find.) 103 N. E. 789, 105 N. E. 385. The rule as to matters of taxation would in large measure be different in .this state on account of our provisions of law as to taxation, but those decisions are interesting in the length to which they go in upholding contracts deemed to be necessary and proper by the governing officers of cities.
It is not asserted that the city acted unwisely in making the Cole contract — the contract is attacked as being illegal and beyond the power of the city to make it. The question whether it was good business or a wise move to so employ Cole was a question in the first instance to be determined by the city officials. Their conclusion that the contract was necessary and an act of wisdom is supported by the results produced.
The plaintiff attacks that provision of the contract fixing a contingent compensation at a percentage of the amounts collected. There again is a question which was to be determined by the officers of the city in their sound business judgment. If measured by the accomplished results it may be that a fixed sum as compensation would have been advantageous to the city. Of course, if no unpaid back royalty had been discovered and collected, then a fixed sum as compensation would have been disadvantageous to the city. Payment for personal services contingent upon success, or contingent as to the amount ultimately payable, is well recognized in proper cases. That plan is often observed in the employment of attorneys, collectors, brokers, architects, and others. In some instances it is specifically authorized by statute. Several of the cases above cited uphold that plan of payment bs municipalities for certain services. No reason is shown here why that method of payment would vitiate or affect the employment of Cole under the contract here involved, or affect the power of the city' to make the contract.
The plaintiff attacks this contract as being void as against public policy. We have held specifically that an agreement to pay a contingent fee is not against public policy in Culver v. Diamond, 64 Okla. 271, 167 P. 223.
Executed contracts should not be held void as against public policy, unless the court is without doubt clearly and positively directed to that conclusion. In Huber v. Culp, 46 Okla. 570, 149 P. 216, this court held as follows:
"In order to declare a contract against public policy, and void, it must conflict with the morals of the times or contravene established interests of society, as deduced from the Constitution, laws and judicial decisions.
"Power of the court to declare a contract void as being in contravention of public policy is a very delicate and undefined power, and should be exercised only in cases free from doubt."
That opinion was cited with approval as to this rule in the more recent case of Warren v. Dodrill, July 2, 1935, 173 Okla. 634, 49 P. (2d) 137.
Plaintiff contends that the contract is void because it authorizes Cole to bring suits in the name of the city against royalty debtors who refuse to pay. The defendants contend that the contract grants no such authority, but, on the contrary, that if legal action was necessary in any case, the same was to be instituted and prosecuted by the eit3'-, with the aid and assistance of Cole. The latter construction of the contract is the better supported when the contract is considered as a whole. Furthermore, no effort has been made by Cole to institute any such action, nor has he claimed to have that authority. The collections made by him, which form the basis for this penalty action and fix the sum sued for, were made without any suit. It is not necessary to further notice this contention.
The plaintiff seeks to recover as a penalty double the sum collected by Cole as his 25 per cent, of the total collected by him from back royalties.
In the trial court a demurrer was sustained to plaintiff's petition. A copy of the contract is pleaded, also actions and resolutions of the city council in reference to the execution of the contract, and in reference to proceedings under the contract, and correspondence in reference to the contract. From a consideration of all the exhibits and the allegations of the petition, we conclude that the contract, in so far as here involved, is not void as against public policy, that it was within the power of the city to make it, if in the minds of the governing officers of the city in the exercise of their sound business judgment it was justified and necessary, under the existing circumstances and conditions.
It follows that the demurrer was properly sustained and that judgment is affirmed.
BUSBY and CORN, JJ., and C. W. CAMERON and A. G. C. BIERER, Jr., Special Justices, concur.
McNEILL, C. J., and RILEY and GIBSON, JJ., dissent.
OSBORN, Y. C. J., and PHELPS, J., disqualified and not participating.
BATLESS, X, absent.