Opinion ID: 1175616
Heading Depth: 1
Heading Rank: 5

Heading: (4) A public official who, in good faith, authorizes the improper expenditure of public funds is personally liable to repay such funds only if he failed to exercise due care in permitting the expenditure.

Text: Although we have determined that the judgment must be reversed, there remains the serious question whether, assuming public funds were improperly expended for campaign purposes, defendant Mott may be held personally liable to repay such funds. Plaintiff asserts that Mott should be held strictly liable for such expenditures, relying upon the concluding portion of this court's opinion in Mines v. Del Valle, supra, 201 Cal. 273, 288-289. In Mines, after determining that the Los Angeles board of public service commissioners had no authority to spend public funds to promote the passage of the bond issue, our court went on to hold the individual commissioners personally liable for the improper expenditures, specifically rejecting defendants' contention that their good faith belief in the propriety of their actions might absolve them from civil liability. If this portion of Mines retains vitality today, defendant Mott would be strictly liable for any funds which he erroneously authorized the department to expend. As we shall explain, however, for a number of reasons we have concluded that this latter portion of the Mines decision is no longer sound, and should not be followed in the present case. In the first place, as the Mines opinion itself reveals, the decision to hold public officials strictly liable for every unauthorized expenditure rested in large part on the assumption that the limits of authorized public expenditures are always clearly ascertainable and thus that there could be no excuse for a public official innocently to exceed such boundaries. As the Mines court stated: `[T]he powers of municipal officers are well defined. Their modes of procedure in all matters of expenditure are pointed out with particularity. They are given by law a legal adviser, and, if not, are fully empowered to employ one. There is no occasion whatsoever for their taking any step without such advice. There is no reason for their ever making any illegal expenditure of the public's moneys. To countenance the making by these officials of an illegal expenditure in one case is to open wide the door for like expenditures in every case.' (201 Cal. at p. 288, quoting Osburn v. Stone (1915) 170 Cal. 480, 484 [150 P. 367].) [9] As we have already noted, however, in the instant context the line between proper informational activities and improper campaign expenditures is not always clear. In many instances the propriety of expenditures may turn on an evaluation of such subtle factors as the style or tenor of the public agency's presentation. Under such circumstances, it is unrealistic to assert, as the Mines court did, that [t]here is no reason for... ever making any illegal expenditure of the public's moneys. Moreover, not only does the Mines decision rest upon an unrealistic factual assumption, but, perhaps more significantly, we believe that the decision's imposition of strict liability on public officials who, in good faith, mistakenly authorize improper expenditures, is incompatible with subsequent legislative developments in related areas. The California Tort Claims Act of 1963 constitutes the most notable and comprehensive of the legislative revisions. Prior to the enactment of the tort claims act, and to this court's decision in Muskopf v. Corning Hospital Dist. (1961) 55 Cal.2d 211 [11 Cal. Rptr. 89, 359 P.2d 457] which precipitated that enactment, governmental entities were generally immune from liability for any losses caused by the conduct of their employees, but the public employees themselves were frequently personally liable for such losses. (See Van Alstyne, Cal. Government Tort Liability (1964) pp. 8-16, 24-27.) The tort claims act reversed this arrangement, subjecting governmental entities to liability for damage caused by their employees (Gov. Code, § 815.2), and granting public employees broad statutory rights to indemnification from their public employers. (Gov. Code, §§ 825-825.6.) Thus, as this court noted in Johnson v. State of California (1968) 69 Cal.2d 782, 792 [73 Cal. Rptr. 240, 447 P.2d 352], as a consequence of the indemnification provisions of the tort claims act the public employee faces only a slim danger of ultimate personal liability; such liability attaches only in the rare instances of injuries arising from acts either outside the scope of employment or performed with actual fraud, corruption or malice. (Fn. omitted.) Although the indemnification provisions of the tort claims act are not directly applicable to an action by or on behalf of a public entity to recover moneys misappropriated or illegally expended by a public employee, the act's provisions do reflect a general state policy to limit a public employee's personal financial responsibility for errors committed in the course of his public employment. We recognize, of course, that public officials who either retain custody of public funds or are authorized to direct the expenditure of such funds bear a peculiar and very grave public responsibility, and that courts and legislatures, mindful of the need to protect the public treasury, have traditionally imposed stringent standards upon such officials. (See, e.g., Pen. Code, § 424; People v. Dillon (1926) 199 Cal. 1, 12-15 [248 P. 230]; Bird v. McGoldrick (1938) 277 N.Y. 492 [14 N.E.2d 805, 806-807, 116 A.L.R. 1059] (Lehman, J.).) A separate provision of the tort claims act indicates, however, that even with respect to such officials, public policy does not always dictate a rule of strict liability; under section 822 of the Government Code, a public official is liable for public moneys stolen from his custody only if the loss was sustained as a result of his own negligent or wrongful act or omission. [10] No specific statutory provision governs the liability of public officials for the type of improper expenditures alleged in the present case. Section 13324 of the Government Code, the statutory provision most closely in point, provides only that [e]very person who incurs any expenditure in excess of the allotments or other provisions of the fiscal year budget ... is liable both personally and on his official bond for the amount of the excess expenditures. (Italics added.) Significantly, there is no comparable provision rendering a public official personally liable for all improper expenditures, and, of course, the present complaint does not allege that defendant authorized expenditures in excess of the department's budgetary allowance. In light of the present California statutory provisions discussed above, and our determination that Mines' adoption of a strict liability standard was premised on the unrealistic assumption that the propriety or impropriety of a given expenditure is always readily ascertainable, we have concluded that the Mines decision should be overruled insofar as it holds a public official strictly liable for any expenditure of public funds which is later determined to be unauthorized. In our view, the Mines approach imposes an overly harsh sanction on well-motivated public officials, and will often work to the detriment of the public interest by deterring such officials from undertaking such activities as the dissemination of useful information to the public. Having rejected Mines' strict liability rule, we must determine under what circumstances a public official may be held personally liable for an unauthorized expenditure of public funds. [11] As noted above, under the tort claims act a public employee generally must bear the ultimate financial responsibility for his actions in cases of fraud, corruption or actual malice (see Gov. Code, § 825.6); there can be no question, of course, that the improper expenditure of public funds under similar circumstances would also render a public official personally liable. In light of the considerable authority enjoyed by officials who control public funds, and the important public interest in protecting such moneys from improper use, however, we believe that such officials may properly be held to a higher standard than simply the avoidance of fraud, corruption or actual malice in their handling of public funds. We conclude instead that such public officials must use due care, i.e., reasonable diligence, in authorizing the expenditure of public funds, and may be subject to personal liability for improper expenditures made in the absence of such due care. [12] (5) Numerous considerations may be relevant to the determination of whether a public official has acted with due care or not. For example, a court may consider whether the expenditure's impropriety was obvious or not (see, e.g., People v. Dillon, supra, 199 Cal. 1, 15), whether the official was alerted to the possible invalidity of the expenditure (see, e.g., County of Shasta v. Moody, supra, 90 Cal. App. 519, 524; 35 Ops.Cal. Atty.Gen. 112, 113 (1960)), or whether the official relied upon legal advice or on the presumed validity of an existing legislative enactment or judicial decision in making the expenditure, (Cf. People v. Dillon, supra, 199 Cal. 1, 14-15; Adams v. Bryant, supra, 236 Ark. 859 [370 S.W.2d 432, 436-437].) In the present case, plaintiff's first amended complaint did not allege that defendant Mott had failed to exercise due care in authorizing the challenged expenditures, but, of course, under the previously governing Mines rule no such allegation was required. Since we now overrule Mines on this point, on remand plaintiff should be permitted to amend his complaint if he so desires.