Opinion ID: 1870644
Heading Depth: 1
Heading Rank: 8

Heading: personal liability and the recapture of expended funds

Text: The trial court paved the way for the imposition of personal liability for the school board members. In Chancellor Zuccaro's opinion, the court stated that, the State of Mississippi is entitled to recover of and from the members of the Board of Education of Claiborne County, Mississippi, who voted affirmatively in favor of expenditures hereinafter set forth, to-wit: The final judgment which followed the written opinion used identical language. Before turning to the personal liability issues raised in this suit, we find that our impetus into this area is substantially assisted by a look at similar experiences in other jurisdictions. Unquestionably, the most thorough discussion of permissible expenditures by public bodies can be found in a 1953 New Jersey Supreme Court decision by Justice William J. Brennan, Jr. (later United States Supreme Court Justice). Citizens to Protect Public Funds v. Bd. of Education of Parsippany-Troy Hills T.P., 13 N.J. 172, 98 A.2d 673 (1953) (hereinafter cited as Citizens to Protect Public Funds or Citizens ). In Citizens, a school bond referendum was at issue, and the local board of education had authorized an expenditure of funds in the preparation and printing of an eighteen page booklet entitled, Read the Facts Behind the Parsippany-Troy Hills School Building Program. Citizens to Protect Public Funds v. Bd. of Education, 13 N.J. 172, 98 A.2d 673, 674 (1953). The booklet contained facts regarding the rapid growth of the grade school population, inadequacies of existing facilities, proposed additions, architectural sketches, aggregate and annual costs and the tax impact for the community. Id. 98 A.2d at 674. However, on the cover and on two pages of the booklet there were instructions to, Vote Yes  December 2, 1952, and a page which listed the negative consequences in the event the referendum failed. What Will Happen if You Don't Vote Yes? Id. A local citizens group filed a complaint which challenged, among other things, the legality of the expenditure of public funds by a public body for the advocacy of a favored position. This suit by the citizen taxpayers was spurred, in part, by the absence of any New Jersey statute authorizing an expenditure of public funds in the manner exercised in this case. Id. at 676. The Court began by noting that fair implication of New Jersey law allowed the board to spend some funds in an informational role, incident to the board's legal duty to build and maintain school facilities. Citizens to Protect Public Funds, 98 A.2d at 676 (citing R.S. 18:7-77.1, N.J.S.A.). The power so implicit plainly embraces the making of reasonable expenditures for the purpose of giving voters relevant facts to aid them in reaching an informed judgment when voting upon the proposal. Citizens, 98 A.2d at 676. The board could spend public funds to inform the community in a fair presentation of both the good and bad consequences of a proposed bond referendum. Id. at 677. However, Justice Brennan concluded that this board of education had overstepped its legitimate and necessary reach. But the defendant board was not content simply to present the facts. The exhortation Vote Yes is repeated on three pages, and the dire consequences of the failure to do so are over-dramatized on the page reproduced above. In that manner the board made use of public funds to advocate one side only of the controversial question without affording the dissenters the opportunity by means of that financed medium to present their side, and thus imperilled the propriety of the entire expenditure. The public funds entrusted to the board belong equally to the proponents and opponents of the proposition, and the use of public funds to finance not the presentation of facts merely but also arguments to persuade the voters that only one side has merit, gives the dissenters just cause for complaint. The expenditure is then not within the implied power and is not lawful in the absence of express authority from the Legislature. Citizens to Protect Public Funds, 98 A.2d at 677. The New Jersey Court emphasized that school board members acting in their official capacity shed no First Amendment rights in their advocacy of policies which are deemed beneficial to the district. Indeed, the effective discharge of an elected official's duty would necessarily include the communication of one's considered judgment of the proposal to the community which he or she serves. Citizens to Protect Public Funds, 98 A.2d at 677. For it is only when public coffers are used to advocate only one side, with no opportunity for dissenters to present their side of the issue, when school boards overstep lawful authority and any implied power. Citizens to Protect Public Funds, 98 A.2d at 678. In a nutshell, the school board can inform, but not persuade. Other jurisdictions have looked to the New Jersey experience for guidance. In Stanson v. Mott , the California Department of Parks and Recreation spent $5000.00 of public funds to actively promote the passage of a bond referendum for the benefit of state parks. Stanson v. Mott, 17 Cal.3d 206, 551 P.2d 1, 130 Cal. Rptr. 697 (1976). The California Supreme Court adopted the rationale of Citizens to Protect Public Funds, in total, finding that a fundamental notion of a democratic electoral process precludes government from taking sides in elections or bestowing an unfair advantage to one of several competing factions. Stanson, 551 P.2d at 9, 130 Cal. Rptr. at 705. The California Court could find nothing in its Public Resources Code which authorized an agency of the state to spend the taxpayer's money in a campaign to promote the passage of a bond issue. Id. at 10, 130 Cal. Rptr. at 706. In Stanson, the Court commented on the fine line between a permissible fair presentation of the facts and improper campaign activity. Problems may arise, of course, in attempting to distinguish improper `campaign' expenditures from proper `informational' activities. With respect to some activities, the distinction is rather clear; thus, the use of public funds to purchase such items as bumper stickers, posters, advertising `floats,' or television or radio `spots' unquestionably constitutes improper campaign activity (see, e.g., Mines v. Del Valle, supra, 201 Cal. [273] at p. 276, 257 P. 530; Porter v. Tiffany, supra [11 Or. App. 542] 502 P.2d [1385] at p. 1386), as does the dissemination, at public expense, of campaign literature prepared by private proponents or opponents of a ballot measure. (See 51 Ops.Cal.Atty.Gen. 190, 194 (1968); Stern v. Kramarsky, supra, [84 Misc.2d 447], 375 N.Y.S.2d 235.) On the other hand, it is generally accepted that a public agency pursues a proper `informational' role when it simply gives a `fair presentation of the facts' in response to a citizen's request for information (see Citizens to Protect Pub. Funds v. Board of Education, supra, [13 N.J. 172] 98 A.2d 673, 677; Stern v. Kramarsky, supra, 375 N.Y.S.2d 235, 239-40; 51 Ops.Cal.Atty. Gen. 190, 193 (1968). Stanson, 551 P.2d at 11, 130 Cal. Rptr. at 707. More recently, a Florida appellate court was faced with a similar question wherein Palm Beach County had authorized $50,000.00 to promote the passage of a local Health Care Act. Palm Beach County v. Hudspeth, 540 So.2d 147 (Fla. 4th Dist.Ct. App. 1989). Finding little guidance in Florida law, the Florida appellate court endorsed the approach taken in Citizens to Protect Public Funds v. Board of Education of Parsippany-Troy Hills TP., 13 N.J. 172, 98 A.2d 673 (1953). The Florida court summarized the cases on point as follows. The theme which predominates in these cases, and one which is reinforced by logic and common notions of fair play, is simply stated. Why the county not only may but should allocate tax dollars to educate the electorate on the purpose and essential ramifications of referendum items, it must do so fairly and impartially. Expenditures for that purpose may properly be found to be in the public interest. It is never in the public interest, however, to pick up the gauntlet and enter the fray. The funds collected from taxpayers theoretically belong to proponents and opponents of county action alike. To favor one side of any such issue by expending funds obtained from those who do not favor that issue turns government on its head and is the antithesis of the democratic process. In order to create a special taxing district, government must permit the people to be heard and, in fact, to make the ultimate decision at the ballot box. If government, with its relatively vast financial resources, access to the media and technical know-how, undertakes a campaign to favor or oppose a measure placed on the ballot, then by so doing government undercuts the very fabric which the constitution weaves to prevent government from stifling the voice of the people. An election which takes place in the shadow of omniscient government is a mockery  an exercise in futility  and therefor a sham. The appropriate function of government in connection with an issue placed before the electorate is to enlighten, NOT to proselytize. Palm Beach County v. Hudspeth, 540 So.2d 147, 154 (Fla. 4th Dist.Ct.App. 1989). See Stern v. Kramarsky, 84 Misc.2d 447, 375 N.Y.S.2d 235, 239 (1975) (Public funds are trust funds and as such are sacred and are to be used only for the operation of government.). We find compelling wisdom and sound logic in this line of cases which recognizes a balanced, informational role in educating the local community about referendum proposals. A fair and balanced presentation of the facts would also include relevant information addressing the tax impact as well as proposed community benefits. A line does exist between a fair presentation of the facts in an innocent informational role and a concerted campaign designed to achieve the objectives of the proponents. In the words of the Florida appellate court, the taxpayer's money belongs equally to proponents and opponents, and government can never, pick up the gauntlet and enter the fray. Palm Beach County v. Hudspeth, 540 So.2d 147, 154 (Fla. 4th Dist.Ct. App. 1989). Our research reveals that several states are assisted by specific constitutional or state law provisions which address governmental expenditures of public funds for the advocacy of favored positions. For example, in Anderson v. City of Boston , the Supreme Judicial Court found that the Massachusetts Home Rule Amendment prohibited the city from appropriating funds for the purpose of influencing an election on a state referendum, citing M.G.L.A. ch. 55, § 22A. Anderson v. City of Boston, 376 Mass. 178, 380 N.E.2d 628, 633 (Mass. 1978). The Legislature may decide, as it has, that fairness in the election process is best achieved by a direction that political subdivisions of the State maintain a `hands off' policy. Anderson, 380 N.E.2d at 639. The constitution of our sister State of Louisiana speaks to the application of public funds in election campaigns. Section 4. No public funds shall be used to urge any elector to vote for or against any candidate or proposition, or be appropriated to a candidate or political organization. This provision shall not prohibit the use of public funds for dissemination of factual information relative to a proposition appearing on an election ballot. La. Const. art. XI, § 4. In Godwin v. East Baton Rouge Parish School Board , the appellants alleged that the school board spent taxpayer funds to promote a tax proposal in violation of the constitutional prohibition. Godwin v. East Baton Rouge Parish School Board, 372 So.2d 1060 (La. 1st Dist.Ct.App. 1979). In light of the express constitutional prohibition, the appellate court concluded that the allegations of the complaint, if true, would subject board members to personal liability upon a showing of malice or bad faith. Godwin, 372 So.2d at 1064. See Burt v. Blumenauer, 299 Or. 55, 699 P.2d 168, 176 (1985) (result governed in part by Oregon election finance laws; Court observed, government may facilitate the market but not itself enter the bidding.); League of Women Voters of California v. Countywide Criminal Justice Coordination Committee, 203 Cal. App.3d 529, 250 Cal. Rptr. 161 (1988) (Court found no violation of California's Public Resources Code or Political Reform Act; Public resources were used only to formulate and draft proposed initiative, not partisan campaign activities); Ryan v. Warren Township High School Dist. No. 121, 155 Ill. App.3d 203, 109 Ill.Dec. 843, 846, 510 N.E.2d 911, 914 (1987) (Illinois Election Interference Prohibition Act, Ill. Rev. Stat. ch. 46, para. 103 (1985), prohibits use of public funds in partisan political campaigns). Turning now to the case at bar, the plaintiffs below and appellees here direct the Court's attention to section 37-61-19 and argue that statutory authority exists to impose personal liability on the school board members who voted in favor of the illegal expenditures. Expenditures shall be limited to budgeted amounts; personal liability for excess. It shall be the duty of the county boards of education, the county superintendents of education, and the boards of trustees of all school districts, including municipal separate school districts, to limit the expenditure of school funds during the fiscal year to the amounts set forth in the respective school budgets unless such budgets be revised in the manner provided in this chapter. It shall be the duty of the county boards of education, the county superintendents of education, and the boards of trustees of all school districts, including municipal separate school districts, in making or approving contracts for transportation, selecting, approving, contracting with, and fixing the salaries of superintendents, principals, and teachers, and in expending other available school funds or incurring obligations payable therefrom to limit the amount of expenditures to the funds made available for such purposes during the fiscal year, and it shall be unlawful for any contract to be entered into or any obligation incurred or expenditure made in excess of the funds available for such purposes for such fiscal year. Any member of the county board of education, county superintendent of education, trustee of a school district, or other school official, who shall enter into any contract, incur any obligation, or make any expenditure in excess of the amount available for that purpose for the fiscal year shall be personally liable for the amount of such excess; in the event such person has given bond, the sureties on this bond shall likewise be so liable. Miss. Code Ann. § 37-61-19 (1972) (emphasis added). The above statute was amended in 1986, but its substantive content was not changed. The amendment shortened the statute and merely cleaned up multiple references to school districts. Miss. Code Ann. § 37-61-19 (Revised 1990). The appellees point to the last sentence of this statute and argue that, considering the expenditures at issue in this case had an illegal purpose-promoting passage of the bond issue  then such illegal action by the board is equivalent to the statute's prohibited conduct of, incur any obligation, or make any expenditure in excess of the amount available for that purpose... . § 37-61-19. The taxpayers argue that no amount of money can be available to spend on an illegal purpose. There being no amount of money available, by law, for such expenditures, then personal liability logically follows for the board members who voted in favor of the appropriations. This Court has only one modern era reported decision which has even mentioned this statute. Unfortunately, this case is not instructive as to this point. The Frazier opinion merely cited the statute and noted that a school board may not vote to spend money not made available to it from state appropriations and local taxes. Frazier v. State by and through Pittman, 504 So.2d 675, 699 (Miss. 1987). As a political subdivision, a school board is an agency of the State and has a separate and distinct identity from the city or county in which it is located, even though the board can not levy taxes itself and is solely dependent on the city or county for its local tax revenue. Frazier, 504 So.2d at 699; Harrison County v. City of Gulfport, 557 So.2d 780, 789 (Miss. 1990). Mississippi has its own history of jurisprudence which has addressed questions of personal liability of public officials in their entrustment of public funds. The seminal case in this state for public official liability is Paxton v. Baum, 59 Miss. 531 (1882). In Paxton, taxpayers brought suit against county supervisors alleging that the supervisors had made forty-seven (47) illegal appropriations. Paxton, 59 Miss. at 531. In Paxton, this Court was interpreting § 1378 of the Code of 1871, which provided that, the boards of supervisors shall direct the appropriation of the money that may come into the treasury of their respective counties, but shall not appropriate the same to any object not authorized by law.  Paxton, 59 Miss. at 536. (emphasis added). By this section in the 1871 Code, members of the Boards of Supervisors were personally liable for funds spent to, any object not authorized by law. Paxton, 59 Miss. at 536. In Paxton, the question centered on the interpretation of the term, any object not authorized by law, and the Court provided a thorough explanation. The objects to which money in the county treasury may be appropriated are designated by law, and it is not legally appropriable to any other purposes. If it is appropriated by the board of supervisors to some other object than is authorized by law, members are liable personally for it, unless they voted against such appropriation. It is for money appropriated to something for which the law does not permit it to be appropriated at all, in any way or under any circumstances, that members are personally liable. It is for a diversion of money from its legitimate objects, and not for appropriation to a proper object, although in an irregular or unauthorized manner, that liability is imposed on members personally. It is what the money is appropriated to, and not how it is applied, that furnishes the test of personal liability for it. `Object' signifies the thing aimed at, the end sought to be accomplished. If this is not the true interpretation of the language mentioned, members of the boards of supervisors would be liable personally for every mistake or error of judgment or of information as to facts whereby money was appropriated even to proper objects, if not appropriated in strict accordance with law as to every circumstance attending it. Either members of the boards of supervisors are personally liable for every appropriation not made in strict conformity to law, or they are not liable except for a diversion of public money from authorized objects and its appropriation to such as are not authorized. The objects to which the boards may appropriate money are designated by law, and may be known to them; and, in all cases of doubt, they may resolve the doubt against the appropriation, and avoid risk of liability; and it may be supposed that for appropriations to objects not authorized by law, it was intended to make members of the boards of supervisors personally liable. But, in view of the well-settled rule of the common law that for errors or mistakes a public officer acting judicially or quasi judicially is not liable, it could not have been the purpose of the legislature to make members of the boards of supervisors personally liable for errors or mistakes as to how to act in matters committed to such boards by law, and as to objects for which an appropriation of money is authorized to be made by them. It is when they disregard the law as to the objects to which it has devoted the public money, and divert it to some object to which the law has not devoted it, that personal liability attaches. Paxton v. Baum, 59 Miss. 531, 536-37 (1882). (emphasis added). Upon suggestion of error in Paxton, this Court restated its position as follows. Manifestly it is impossible, after we pass the point of corruption, to draw any line other than that laid down by us, namely, liability when the subject-matter of the appropriation is beyond the jurisdiction of the board; non-liability where the object is within the jurisdiction, but there has been a mistaken exercise of legal power. Within its limit, every case must depend upon its own facts. Paxton v. Baum, 59 Miss. 531, 540 (1882) (upon suggestion of error). In State, Lincoln County v. Green , the complaint was against the county superintendent of education seeking to recover sums of money for alleged irregularities in the conduct of his office. State, Lincoln County v. Green, 111 Miss. 32, 71 So. 171 (1916). In declining to impose personal liability, this Court noted that Green was not guilty of corruption or collusion nor had he personally profited from his mismanagement. Green, 111 Miss. at 34, 71 So. at 172. It will be borne in mind that the several matters complained of in the instant case were items of business within the jurisdiction of the county superintendent, and the services charged to have been illegally paid for were services inuring to the benefit of the county, and not to Mr. Green... . In view of the fact, therefore, that the work paid for by the superintendent and the several alleged irregularities were within the jurisdiction of his office and no corruption is charged, the bill fails to state a cause of action. Green, 111 Miss. at 35-36, 71 So. at 172. See Trantham v. Russell, 171 Miss. 481, 489, 158 So. 143, 145 (1934) (no liability where superintendent acted in good faith within scope of authority; no liability for honest errors of judgment). Barnett v. Lollar involved a challenge by the State Auditor against the county school superintendent to recover money that the superintendent allegedly withdrew from the county school fund without legal authority. Barnett v. Lollar, 197 Miss. 574, 19 So.2d 748 (Miss. 1944). The Barnett Court found the superintendent of education to be a quasi judicial officer since he was responsible for issuing certificates of character. Barnett, 197 Miss. at 579, 19 So.2d at 749. Therefore, although this case is factually inapposite from the case sub judice, the question was whether good faith by the school superintendent would immune him from liability in light of the rationale of Paxton. Barnett, 197 Miss. at 580, 19 So.2d at 749. This Court answered the question in the affirmative and declined to impose personal liability because the facts of the case raised an uncertainty of whether or not the superintendent acted in good faith and honest judgment. Id. at 581, 19 So.2d at 750. However, there are instances wherein illegal expenditures by public officials will preclude a defensible position of good faith. Such instances were described in State by Cochran v. Eakin, 203 So.2d 587 (Miss. 1967). We are not to be misunderstood as holding, as respects the expenditure of public funds, that any payment whatever it is, will be without any personal liability on the part of the officer if only the purpose of the payment was somewhere within the general field of his jurisdiction. A payment may be within that general field and yet so clearly and distinctly one which the officer could not lawfully make as to bar him from justification in taking the position that he did it in good faith and honest error. State by Cochran v. Eakin, 203 So.2d 587, 590 (Miss. 1967) (quoting Barnett v. Lollar, 197 Miss. 574, 581, 19 So.2d 748, 750 (1944)). In Entrican v. King, the State Auditor filed suit against county supervisors alleging illegal expenditure of public funds which were committed to road maintenance. Entrican v. King, 289 So.2d 913, 914 (Miss. 1974). Several points can be taken from Entrican which are instructive for the case at bar. The Entrican Court readopted the rationale of Paxton, decided almost a hundred years earlier, and reviewed the 1871 Code language interpreted in Paxton which provided for personal liability only in instances where public money is appropriated, to an object not authorized by law. The Court found that likewise, [t]his is the rule of the common law, as well. Entrican, 289 So.2d at 916. Additionally, the distinction was made between penalty and non-penalty situations wherein personal liability of public officials is sought. In a penalty situation, personal liability is sought for the unauthorized or prohibited manner of an expenditure to a lawful object, yet the public itself suffers no loss or deprivation as a consequence of the unauthorized action by the official. Entrican v. King, 289 So.2d 913, 915 (Miss. 1974). In other words, in penalty situations, the taxpayers are questioning the manner or authority of the public body, even though the funds were committed to a lawful object. Furthermore, if liability is sought in penalty situations, there must be clear statutory intent before liability will attach. Entrican, 289 So.2d at 916. Mississippi jurisprudence does not favor a penalty, and statutory construction of a penal statute will be against the penalty unless provided by clear language. Commercial Nat'l Bank v. Fleetwood Homes of Mississippi, 398 So.2d 659, 661 (Miss. 1981). Consequently, non-penalty situations might be said to exist in instances where public funds are committed to unlawful objects leaving the public wrongfully deprived of resources which it should have had available for legitimate, lawful endeavors. In such cases, the rule of the common law prevails which attaches personal liability to money appropriated, to an object not authorized by law. Entrican v. King, 289 So.2d 913, 915-16 (Miss. 1974) (citing Paxton v. Baum, 59 Miss. 536, 537 (1882)). In State ex. rel . Summer v. Denton , we held that a board of supervisors was not personally liable for county funds paid to relatives in violation of a nepotism statute where the county did not suffer any actual loss due to the unlawful expenditure. State ex. rel . Summer v. Denton, 382 So.2d 461, 462 (1980). This Court noted in 1980, that the principles announced in Paxton had been faithfully followed throughout the years without judicial erosion. Denton, 382 So.2d at 465. Manifestly it is impossible, after we pass the point of corruption, to draw any line other than that laid down by us, namely, liability when the subject-matter of the appropriation is beyond the jurisdiction of the board; non-liability where the object is within the jurisdiction, but there has been a mistaken exercise of legal power. Within its limit, every case must depend upon its own facts. State ex. rel . Summer v. Denton, 382 So.2d 461, 465 (1980) (quoting Paxton v. Baum, 59 Miss. at 540). (emphasis added).