Summary
In Bourne, this court approved specialized legislation permitting the Attorney General to employ special assistants in a contingent fee compensatory fashion to seek out unpaid school and state royalties.
Summary of this case from Union Pacific Resources Co. v. StateOpinion
No. 2062
March 22, 1938
STATE OFFICERS — LEGISLATIVE POWERS — STATE CONTRACTS — STATUTES — INJUNCTION — STATE LEASES — COLLECTION OF UNPAID ROYALTIES AND RENTALS — CONTINGENT COMPENSATION FOR COLLECTIONS — APPEAL AND ERROR.
1. Contracts should not be made by state officers which would encourage constitutional officers to neglect their duty. 2. The performance of a contract entered into by state pursuant to statute providing for investigations of amounts which might be recoverable under leases of state lands for contingent fee of 25 per cent. of sum recovered was not enjoinable as contract which would encourage constitutional officers to neglect their duty (Laws 1937, c. 66). 3. In case of necessity and when usual and customary means and agencies have been found to be inadequate, legislature has power to employ special means and agencies for collecting amounts thought to be due state. 4. The performance of a contract entered into by state pursuant to statute providing for investigations by expert of amounts which might be due state under leases of state lands for contingent fee of 25 per cent. of amount recovered was not enjoinable on ground that function to be performed by expert could be performed by statutory officers, since legislature which created officers could make new provisions with regard to their functions if it deemed proper (Laws 1937, c. 66). 5. Under statute authorizing employment of specially qualified assistants to attorney general to aid in investigation whether money is due state under lease or other contract and aid in recovery thereof, payment of contingent fee in amount not to exceed 50 per cent. of money recovered, contract for services of expert to investigate whether money was due state on leases of state lands for contingent fee of 25 per cent. was not enjoinable on ground that fee was excessive, in absence of showing of facts supporting such conclusion (Laws 1937, c. 66). 6. Contract entered into by state pursuant to statute providing for investigations by expert of amount due state on lease of state lands was not required to be construed to exclude school land leases on ground that payment of contingent fee to expert would diminish school fund in violation of constitution, since a wholly new fund to extent of amount recovered above contingent fee would come into existence through efforts of expert (Laws 1937, c. 66; Act Cong. July 10, 1890, §§ 4, 5, 26, Stat. 222, 223; Const. art. 7, §§ 2, 6; art. 18, § 2). 7. On appeal from judgment denying injunction against performance of contract entered into by state pursuant to statute providing for investigation of amount due state on leases of state land by expert for 25 per cent. contingent fee, contention of amicus curiae that provision for payment of fee of 25 per cent. of all "things of value" which might be recovered was invalid would not be considered by reviewing court where not raised in trial court (Laws 1937, c. 66).
APPEAL from the District Court, Albany County; V.J. TIDBALL, Judge.
For the appellant, there was a brief and an oral argument by Walter Q. Phelan of Cheyene.
The contract is illegal and void for the reason that it violates statutory and Constitutional provisions of the State of Wyoming. It is an unlawful attempt to delegate to defendant Cole duties which are already imposed by statute upon regularly elected and appointed officers and employees of the state. Chapter 66 of Laws 1937, under which said contract was made, is not Constitutional. The compensation provided in the contract is excessive and unreasonable. The pretended contract is an unlawful attempt to deplete permanent state funds. The following authorities support plaintiff's contention. 40 C.J. 892, 50 C.J. 1138, Sections 4 and 5 of the Act of Admission; Sections 2, 6 and 7 of Article 7 of the State Constitution; Sections 1, 2 and 6 of Article 18, State Constitution; Sections 91-106, 513, 516, 517, 522 and 808, R.S. 1931; State v. Snyder, 212 P. 758; Sec. 91-201; 91-211, R.S. 1931; Magnolia Petroleum Company v. Price, (Okla.) 206 P. 1033; State v. McMillen, (N.D.) 96 N.W. 310; Roach v. Gooding, (Ida.) 81 P. 642; 59 C.J. 171, 174; Rowland v. State Board of Arizona, 207 P. 359. The laws of Wyoming place competent public officers at the disposal of the Board of Land Commissioners, for the express purpose of performing the duties dedicated to defendant W. Jack Cole by the contract. The duties of the state geologist are defined by Sec. 91-807, R.S., and those of the commissioner of public lands by Sec. 78-302. The duties of the attorney general are defined by Sec. 109-608, R.S. See also Sec. 91-521, R.S. as to suits. A similar contract was condemned in McDougall v. Board of Land Commissioners, 48 Wyo. 493. The general doctrine is stated in Dillon's Municipal Corporations, 5th Ed. Vol. II, Sec. 824. A case squarely in point is Orton v. State, 12 Wis. 567. See also Clough v. Hart, 8 Kan. 487. The courts of Oklahoma have applied the same rule in Commissioner v. Ridings, 220 P. 96; Board of Education v. Thurman, 247 P. 996; Board v. King, 294 P. 101. The same question arose in Platte County v. Gerrard, (Nebr.) 11 N.W. 298. Chapter 66, Session Laws of 1937 is clearly a violation of the provisions of the Wyoming Constitution. Article 18, Section 2, Wyoming Constitution. The judgment below should be reversed.
For the respondent, W.J. Cole, there was a brief and oral argument by Clyde M. Watts of Cheyenne.
At the present time, the moneys sought to be recovered are not in the school fund. The legislature can abolish any office which it has created, or change the duties or emoluments thereof. Sec. 109-601, R.S. The case of MacDougall v. Board, 48 Wyo. 493 involved a contract not made under a statute. Chapter 66, Laws 1937 covers the objections urged in MacDougall v. Board, supra. Chapter 66, Laws 1937 repealed earlier statutes. The contract is valid. Miles v. Cheyenne County, 148 N.W. 959; Shinn v. Cunningham, 120 Iowa, 383; Brown v. Bigne, (Ore.) 28 A.S.R. 752; County v. Layman, (Ill.) 33 N.E. 1094; Church v. Hadley, (Mo.) 39 L.R.A. (N.S.) 248; Disbrow v. Cass County, (Iowa) 93 N.W. 586; State v. Davis, 217 P. 905; Nevada v. Rhodes, 4 Nev. 312; United States v. Swope, 16 F.2d 215 (C.C.A. 8th). In the construction of Constitutions, intent prevails over literal meaning. 12 C.J. 702. General principles governing the construction of statutes apply to Constitutions. Zancanelli v. Central Coal Coke Company, 25 Wyo. 511; C. N.W. Ry. Co. v. Hall, 46 Wyo. 380. The word "proceeds" is commonly used to designate the source rather than the extent of moneys received. Hunt v. Williams, 126 Ind. 493. See also In re Board, 133 P. 140; Governor v. McEwen, (Tenn.) 5 Humphreys 241. The action here is for damages incurred for breach of contract and there will be no money available for any purpose, if no damages are recovered. The case narrows down to these questions: (1) Can you deplete a fund that is not in existence? (2) Is the law under which the contract in question is made Constitutional? In our opinion, the answer to the first question is no, and the answer to the second question is yes.
For the respondents Ray E. Lee and Leslie A. Miller, as Governor, there was a brief by Ray E. Lee, Attorney General; Thos. F. Shea, Deputy Attorney General, and Wm. C. Snow, Assistant Attorney General, all of Cheyenne, and oral argument by Mr. Lee.
The statute, Chapter 66, Laws of 1937, authorizes the Attorney General with the approval of the Governor to enter into a contract employing special assistants to recover moneys due the state under any contract, lease or other instrument, upon a contingent basis, not exceeding one-half of the amount recovered. We accept and adopt the statement of the case and arguments contained in the brief filed on behalf of defendant Cole. We believe that generally speaking the term "proceeds" as used in Section 5 of the Act of Admission means money derived from the sale or lease of property, less expenses of sale or of the lease, including the collection of the amount due through the sale or lease. In re Dixon, 30 A. 1032. That rule applies generally. Wilson Manufacturing Co. v. Winnet, (Nebr.) 91 N.W. 514; in Re Curtis' Will, 16 N.Y.S. 180; Lumber Company v. Thompson, 35 So. 828; Commonwealth v. Alexander, 7 N.E. 1017; 59 C.J. 172, 25 R.C.L. 392. A state contract will be enforced unless it violates the Constitution or specific statutory provisions. State v. Board, 50 Wyo. 181; State v. Young, 44 Wyo. 6.
As Amici Curiae, there was a brief by Wilfred O'Leary of Cheyenne, Wyoming; John R. Moran and Harold D. Roberts of Denver, Colorado; and Harold H. Healy of Casper, Wyoming and oral argument by Robert E. More of Denver, Colorado.
The Constitution of Wyoming prohibits use of any part of the state school fund for the purposes contemplated by the Cole contract. Magnolia Petroleum Company v. Price, (Okla.) 206 P. 1033; Article 18, Section 2 Wyo. Constitution; Article VII, Secs. 2 and 6 State Constitution; Section 91-517, R.S., State v. Snyder, 29 Wyo. 163, Chapter 66, Laws 1937 does not purport to authorize any such contract as that entered into with defendant Cole. No legislative act will be construed as to present a case of violation of the Constitution. Railroad Company v. Johnson, 264 U.S. 375. The lower court erred in sustaining a demurrer to the petition. Chapter 66, Laws 1937 should be construed as not applying to school lands or other trusts of this state, and the particular contract between the respective defendants should be held violative of both the Constitution and the statutes. We append to our brief Sections of the Act of Admission, State Constitution and Revised Statutes, believed to be pertinent to this controversy and also the text of Chapter 66, Laws 1937.
The legislature in 1937 (c. 66, Session Laws 1937) passed an act providing in substance that the attorney general of the state is authorized to employ, with the consent of the governor, specially qualified assistants and counsel to aid him in any investigation as to whether there is due to the state any money under any lease or other contract, and to aid him in the recovery of any such money; to prosecute suits in that connection and with the approval of the governor settle and compromise any claims. Authority is given to pay to any assistants so employed an amount not to exceed fifty per cent of the money recovered as the result of any compromise or litigation, except such amount of fifty per cent necessary to pay court costs. All money so recovered is directed to be paid into the state treasury, and "there is hereby appropriated out of any moneys so recovered by the State of Wyoming, under the provisions of this act, a sum of money not exceeding one half of the amount recovered, for the purpose of paying court costs and the special assistants herein authorized, which payment shall be by warrant or warrants drawn upon the State Treasury."
On July 12, 1937, the State of Wyoming, acting through its governor and attorney general, entered into a written contract with W. Jack Cole, pursuant to the statute just mentioned. The contract recites that the State owns certain lands in Salt Creek, Grass Creek, Medicine Bow and Baxter Basin Oil Fields; that the lands are under lease; that the state wants to investigate whether true and accurate accountings have been made to the state under the leases; that it takes an expert to determine that fact, and that Cole is such expert. He accordingly agreed to make such investigation for a contingent fee of twenty-five per cent of any sum which may be recovered on account of any claim which, after such investigation, may be found to exist. He was given full authority to inspect all books, accounts and leases in this connection. He agreed to pay all expenses of the investigation; to make a detailed report of his findings thereunder to the state; to assist in every way in the negotiations for compromise of any claim and in any litigation for the recovery of any amount found to be due through the investigation. It was agreed that the contract should terminate on December 31, 1938, except as to negotiations or litigation then pending. The decision of the governor and attorney general upon any proposed settlement or compromise, or as to the continuance of investigation, was made binding upon Cole.
This action was brought by the plaintiff, on behalf of himself and all other tax payers, to enjoin the performance of the contract, claiming that it is illegal. A demurrer was filed to the petition, which was sustained, and plaintiff refusing to plead further, judgment was entered against him. An appeal has been taken to this court. In addition to the briefs filed on behalf of the parties hereto, we have been favored with a brief of amici curiae.
It may be noted that the case herein is similar to MacDougall v. Board of Land Commissioners, 48 Wyo. 493, 49 P.2d 663. It appears in that case that the State Board of Land Commissioners sought to have an investigation made similar to that sought to be made under the contract here in question. We held in that case that the contract then involved was illegal, but stated that the holding might have been otherwise, if it had been entered into pursuant to the authorization of the legislature, and if not otherwise in violation of the constitution. It is apparent that Chapter 66 of the Session Laws of 1937 was passed in order to obviate the objections pointed out by the court in that decision.
Under the contract here involved, the money paid to assistants is paid out of the treasury pursuant to legislative appropriation; the control of the investigation to be made and of litigation contemplated is in the attorney general of the state, and its governor. It is apparent that the desire of the state to have such investigation made is of long standing. The contract and the petition herein diclose that it requires an expert to make it, and that defendant Cole is qualified to do so. The legislature evidently believed that, unless an expert would be employed to make the investigation, the amount thought to be due to the state, or the funds managed by it, would never be recovered. While, of course, as was pointed out in the MacDougall case, no contracts should be made which would encourage the Constitutional officers to neglect their duty, we cannot say, under the facts disclosed herein, notwithstanding the assertion to the contrary, that that would be true in this instance. The legislature, in case of necessity, and when the usual and customary means and agencies have been found to be inadequate, must be held to have power, in order that amounts thought to be due to the state may be recovered, to employ special means and agencies for that purpose.
The objection made in the instant case that the function to be performed by Cole may be performed by certain statutory officers, mentioned in the MacDougall case, is of no avail. These officers were created by the legislature; their functions were prescribed by it. New provisions may be made by it in that regard, if it deems that to be proper. Nor can we say, as is urged, that the compensation to be paid to the expert is excessive. No facts appear in the petition which disclose that to be true. The legislature believed that fifty per cent of the amount recovered might not be excessive. The contract in question provides for compsensation to the extent of twenty five per cent of the amount recovered. It has not been pointed out why we should come to a different conclusion than that arrived at by the legislature and the governor and the attorney general. See in that connection Disbrow v. Board, 119 Iowa 538, 93 N.W. 586; Miles v. Cheyenne County, 96 Nebr. 703, 148 N.W. 959.
It appears from the petition that under the contract in question here, Cole is expected to investigate as to whether or not there is anything due to the state under leases of school lands, as well as under leases of other lands. It is argued that the contract, and the statute, should be construed as excluding school-land leases, for the reason that if they are not so construed, the statute must be held to be unconstitutional and the contract illegal, in so far as they authorize the payment to Cole of twenty five per cent of the proceeds which may be recovered pursuant to the contemplated investigation. That argument is based on the theory that under Sections 4 and 5 of the Act of Admission, and under the Constitution (Sections 2 and 6 of Article 7 and Section 2 of Article 18) the proceeds or net proceeds from the sale or other permanent disposition of school lands, must go into the permanent school fund and cannot be diverted therefrom; that to pay Cole twenty five per cent of the amount recovered would diminish the fund to that extent, and that this cannot be lawfully done. The argument is not sound. It is based on the fallacy that the proceeds are in existence, which is not true. It is but hoped that the investigation will bring some to light. If that proves to be true, then the net amount will, of course, be turned into the school fund and will become a part of it. The twenty five per cent paid to Cole will diminish the fund at most theoretically. In actuality, a wholly new fund, to the extent of the remainder, may come into existence. Such a possible fund cannot be treated in the same manner as a fund the existence of which is known. In State ex rel. v. Young, 44 Wyo. 6, 7 P.2d 216, 81 A.L.R. 114, we held that the attorney general had power to compromise a doubtful claim for inheritance taxes, notwithstanding the Constitutional provision that no obligation of the state should in any manner be diminished. In the case of the The Governor, et al., v. McEwen, 5 Humphreys 241, 287, it was held that a claim in favor of the school fund such as is involved here, certain as to amount, but uncertain by reason of the insolvency of the person owing, might be compromised — diminished — by a committee provided for by the legislature. The diminution in these cases came about by compromise. The diminution of the amount in the case at bar would come about by reason of the deduction, or payment, of twenty five per cent for services rendered. The principles involved are much the same — the existence of a doubtful claim, and the diminution of the fund. The particular manner of diminution should not make any difference. It is true, of course, that if money should actually be turned in, the amount would then be certain. But we are dealing now with a fund as it actually exists, not as it is hoped it may turn out to be, and hence the rule of the foregoing cases should, we think, be applied here. The state in this case is the trustee for the school funds. It is held in a number of cases that a fund similar to the school fund here should pay the expenses incident thereto. State v. Davis, 114 Kans. 270, 217 P. 905; State v. Rhodes, 4 Nev. 312; United States v. Swope, 16 F.2d 215; Betts v. Commissioners, 27 Okla. 64, 110 P. 766. We need not decide what the rule should be in ordinary cases, but we think it clear that the deduction of expenses under a situation disclosed in the case at bar cannot be held to be illegal.
It is argued on behalf of the amici curiae as follows: "Subdivision second of the contract emphatically provides that the contingent fee compensation to be paid to defendant Cole shall apply not only to sums of money collected but to all `things of value which may be received, had or recovered' as a result of the settlement or out of litigation. This would mean that if as a result of settlement or out of litigation over enforcement of an oil or gas lease covering school land, the lessee should concede or be required to pay to the school fund an increased rate of royalty to apply to future production, or agree to turn over to the school fund lease equipment or completed wells, defendant Cole would become the owner of his contingent fraction in these items of property in kind." We are not prepared to agree to the correctness of this construction of the contract; if correct, the further question would arise as to whether such agreement would be valid, attempting, as it would, to tie the hands of future officials. But we need not pass upon these points. They are not before the court. The contention here made was not litigated in the court below. The petition in the case does not ask that the contract be declared invalid on the ground contended for, either in whole or in part. If that had been asked, the parties to the contract might have agreed on the true construction thereof, eliminating the objectionable feature, if in fact objectionable, and if that had not been done, the trial court could at most have held the contract invalid in respect to the matter mentioned, without affecting the validity of the remainder, for the provision under consideration is, we think, severable.
The judgment of the trial court is, accordingly, affirmed.
Affirmed.
RINER and KIMBALL, JJ., concur.