Bowling v. Brown

BISHOP, Judge. This appeal involves an action filed by a taxpayer of the Town of La Plata against two of the three members of the Town Council. The taxpayer’s action was a successful attempt to have the two councilmen personally reimburse the town $4,598.07 which had been paid as reimbursement to the Town Manager and the Town Engineer for their criminal defense attorney’s fees. Victor B. Bowling, Jr., and Jack Davis, appellants, are the Mayor and a City Councilman, respectively, of the Town of La Plata, located in Charles County.

The Council of the ²⁵² Town of La Plata is composed of the Mayor and two elected councilmen. Terrence R. Brown, appellee, and cross-appellant, is resident, property owner and taxpayer of the Town of La Plata. John D. Newman, Jr., is the Town Manager and Joseph Ward is the Town Engineer. When the events in this case occurred, Newman and Ward were stockholders of Facility Services, Inc.; Newman was also an officer of that corporation.

Lindy Foster was a paid employee of the Town of La Plata. Brown filed an action in the Circuit Court for Charles County against Mayor Bowling and Councilman Davis, seeking a declaratory judgment that Bowling and Davis had acted beyond the powers granted to them under the Town Charter when they approved by a two to one vote (Councilman Gyorda voting in the negative) Town Resolution 80-5, as a result of which public monies of the Town of La Plata were paid for Newman’s and Ward’s counsel fees. Brown further sought a money judgment in favor of the Town against Bowling and Davis, jointly and severally, in the amount of the expenditures along with reasonable attorney’s fees to be awarded from the fund created by the judgment. After a court trial (Bowling, J.) judgment was entered in favor of Brown and the Town against both appellants in the amount of $4,598.07.

Appellants ask whether the trial court erred in making the following rulings: I. That the payment of the funds under Resolution 80-5 was not for a public purpose; II. That Article 23A, section lB(a) does not apply; III. That the individual Town Council members do not have qualified immunity for discretionary acts performed without malice; and IV. That the “good faith” standard does not apply and the appellants did not exercise due care.

Brown, in his cross-appeal, asks whether the Circuit Court erred in failing to award him attorney’s fees where his suit has resulted in the creation of a fund for the benefit of all the taxpayers. ²⁵³ The Facts We adopt the facts as set out in the opinion of the trial court: “On May 13, 1980, John D. Newman, Jr., and Joseph Ward were charged with corrupt misuse of their respective public offices as Town Manager and Town Engineer by converting for their personal use and benefit as officers and stockholders of Facility Services, Inc., a private corporation, the services of Lindy Foster, an employee of the Town of La Plata, for which services she was compensated by the Town of La Plata. The charges also included a count premised upon each criminal defendant’s alleged disregard of his official duties by permitting Lindy Foster’s services to be converted for the use of Facility Services, Inc., with a consequential perversion of each criminal defendant’s trust as a municipal employee. * $ sj: $ $ $ The charges were made by criminal information prepared and filed by the State’s Attorney for Charles County. Prior to the information being prepared and filed, the matters which were the subject of the criminal informations were presented to the Grand Jury of Charles County, and a criminal presentment was returned by the Grand Jury, which formed the basis for the criminal information drafted and filed by the State’s Attorney for Charles County. Each of the defendants retained counsel, and after a Motion to Dismiss was filed on behalf of Joseph Ward, the information was dismissed by a nolle prosequi by the State’s Attorney for reason that a prior decision of the Court of Appeals ruled that a town engineer was not an official of the town and therefore, could not be charged under the Statute which formed the basis of the charges against him.

Thereafter, the State’s Attorney concluded that he was unable to pursue the charges against John D. Newman, Jr., beyond a reasonable doubt and dismissed the criminal information filed against him by a nolle prosequi. ²⁵⁴ John D. Newman, Jr., and Joseph Ward discussed with the Defendant Bowling the possibility of reimbursement to them of counsel fees which they had paid. No demand for said fees, however, had been made by either employee. The Defendants testified at trial that the Grand Jury had probable cause for the issuance of the presentment against both employees. The Defendants discussed the possibility of the Town reimbursing the employees for legal expenses incurred, and on one occasion the Defendant, Jack Davis, stated to the Defendant, Victor B. Bowling, Jr., that he would only approve such a payment if counsel advised that it was permissible.

No testimony was given as to precisely what information was given to the Town attorney, but Resolution 80-5 adopted on October 14, 1980 by the Town Council by a two-to-one vote, (the Defendants having voted in favor of the Resolution), recited that: WHEREAS, criminal charges were brought against Mr. Newman and Mr. Ward by the State’s Attorney, Charles County, Maryland, charging Mr. Newman and Mr. Ward with malfeasance and non-feasance, and WHEREAS, the State’s Attorney for Charles County, Maryland, has thoroughly investigated all allegations made against Town employees and dismissed all charges against Town Employees, and WHEREAS, members of the Town Council have investigated the allegations made against Town Employees and have found no factual basis for these allegations, and WHEREAS, these criminal charges brought by the State’s Attorney for Charles County, Maryland against Mr. Ward and Mr. Newman were directly related and involved their duties as employees of the Town of La Plata, and WHEREAS, there is legal precedent for reimbursing town officials for legal services and expenses as indicated below: 1. City of Moorhead v. Murphy, [ 94 Minn. 123 ] 102 N.W. 219 , states Tn the absence of prohibitive charter ²⁵⁵ provisions a municipality has the power to reimburse police officer for attorney fees and expenses incurred in the defense of an action for false imprisonment. 2. Marian Cobb, et al v. City of Cape May, [ 113 N.J.Super. 598 ] 274 Atl.2nd 622, held that a ‘Public official is entitled to compensation incurred in the performance of his official duties. The right of a municipality to provide for defense of mayor or other officials if (sic) municipality in suit is not circumscribed by whether he acts precisely within his statutory authority-’ RESOLVED by the Town Council of La Plata that Mr. Ward and Mr. Newman be reimbursed for all legal fees incurred as a result of the charges brought against them by the State’s Attorney for Charles County, Maryland.

(Plaintiff’s Exhibit No. 6.) The Resolution was signed by each of the Defendants and it showed that the third Council member, John G. Gyorda, voted ‘nay’. It is agreed by all parties that the use of Lindy Foster’s services for Facility Services, Inc., as alleged in the criminal informations, was not within the scope of the authority and/or employment of either John D. Newman, Jr., or Joseph Ward. As a result of this Resolution, $3,076.57 from public funds was paid as reimbursement for the criminal defense of John D. Newman, Jr., and $1,521.50 was paid from public funds for reimbursement for criminal defense of Joseph Ward.” s}; sfs ¡}c ¡js sfc Under Section 19(24) of the Town Charter the Town Council is authorized: “[t]o levy, assess, and collect valorem property taxes; to expend municipal funds for any public purpose; to have general management and control of the finances of the Town.” There is provision under the “Saving Clause,” subsection 58 of Section 19 that “the enumeration of powers in this section is not to be construed as limiting the powers of the ²⁵⁶ Town to the several subjects mentioned.” Appellant argues that the trial court erred in finding that the expenditure of the funds pursuant to Resolution 80-5 was not for a public purpose because the court made this determination solely on “the fact that the criminal information . . . was not for the benefit of the Town of La Plata.” They asseverate that the court failed to consider “the public benefits derived from assisting the Town in recruiting and retaining qualified officials and to maintain morale. Appellants claim that since the basis for the criminal charges were the allegations that had been previously made by Councilman Gyorda and since Councilman Gyorda’s investigation was having an adverse effect on Town employees and disrupting Council activities, it was necessary to pass Resolution 80-4, a resolution which closed the investigation of the allegations against the Town employees.

As we follow it, appellants’ argument proceeds that since the investigation and allegations against them were founded in what appeared to be a political controversy that caused negative effects on the Town employees and the function of the Town Council, and since Resolutions 80-4 and 80-5 were passed to alleviate those conditions, they were passed for a public purpose. In Snow-den v. Anne Arundel County, 295 Md. 429, 434 , 456 A.2d 380 (1983) the Court stated: “Giving content to the ‘public purpose’ requirement has not been a simple task. As we said in Finan v. M. & C.C. of Cumberland, 154 Md. 563, 565 , 141 A. 269 (1928), and more recently in Horace Mann League v. Board, 242 Md. 645, 685 , 220 A.2d 51 , cert. denied, 385 U.S. 97 , 87 S.Ct. 317 , 17 L.Ed.2d 195 (1966): ‘What is a public purpose for which public funds may be expended is not a matter of exact definition; it is almost entirely a matter of general acceptation.’ ” There is no prohibition against the payment of public funds to private persons or institutions so long as there is a public purpose being served. Id. at 435, 456 A.2d 380 .

Appellee refers us to a string of cases, each of which held that the payment or reimbursement of legal expenses on ²⁵⁷ behalf of government employees serves no public purpose where the employee’s legal problems arise out of activities that did not involve the discharge of their public duties. Board of Chosen Freeholders v. Conda, 164 N.J.Super. 386 , 396 A.2d 613 (1978) (public employee used for personal business during government business day); Township of Manalapan v. Loeb, 126 N.J.Super. 277 , 314 A.2d 81 (1974) (misuse of Town credit card); Powers v. Union City Board of Education, 124 N.J.Super. 590 , 308 A.2d 71 (1973) (extortion from government supplier). On the other hand in Snowden the Court pointed out: “Since a municipality may be civilly liable for the criminal action of its officials, reimbursement of the legal expenses incurred by such officials following a successful defense serves to protect the municipal corporation. City of Montgomery v. Collins, 355 So.2d 1111, 1114-15 (Ala. 1978).

It has been held that the policy of reimbursement encourages a ‘faithful and courageous discharge of duty on the part of public officers.’ Curry v. City of Portage, 195 Wis. 35 , 217 N.W. 705 (1928).” Snowden, supra, 295 Md. at 436-37 , 456 A.2d 380 . It appears to us that the Snowden ordinance differs from the one in this case in a most important aspect, i.e., the exposure of the employees in Snowden to unusual risk of suffering financial liability as a result of the nature of their calling. As the Snowden Court put it: “In this case, the County maintains, and we agree, that the public benefits from the challenged ordinance because its provisions better enable the County to recruit and retain qualified public safety employees, and to maintain morale. The ordinance affords necessary protection to those employees who, by the nature of their calling, are uniquely at risk of suffering financial liability as a result of their duties.

The ordinance provides reimbursement only to one who has successfully defended against criminal or administrative charges.” Id. at 438-39 , 456 A.2d 380 . ²⁵⁸ Newman and Ward conceded in the trial that their actions, which precipitated and upon which the criminal information was based were beyond the scope of their employment. It is clear to this Court that the actions of Newman and Ward, upon which the criminal charges were based, did not fall within the scope of their authority or employment as Town Manager and Town Engineer. It is equally clear that those actions were not a result of their municipal duties and that to reimburse them for their legal expenses would not encourage the “faithful and courageous discharge of duty on the part of public officials.” Snowden, supra. On the contrary, it would encourage the reverse.

We adopt the carefully researched and well drafted opinion of the trial judge and we affirm its findings and rulings: “I. Public Purpose The general rule is that expenditures by an administrative official are proper only insofar as they are authorized, explicitly or implicitly, by legislative enactment. Stan-son v. Mott, 17 Cal.3d 206 , 551 P.2d 1 , 130 Cal.Rptr. 697 (1976). ‘[S]uch executive officials are not free to spend public funds for any “public purpose” they may chose, but must utilize appropriated funds in accordance with the legislatively designated purpose.’ Id. [551 P.2d at] 6 [ 130 Cal. Rptr. at 702 ]. The legislative authorization must be in ‘clear and unmistakable language.’ Mines v. Del Valle, 201 Cal. 273, 287 , 257 P. 530 (1927), quoted with approval in Stanson, 551 P.2d at 10 [ 130 Cal.Rptr. at 706 ].

Such a standard is not met in any of the statutory or charter provisions relied upon by defendants to justify the challenged expenditures. Defendants argue that the test to be applied by the Court on the public purpose issue is that set forth in Williamsport v. Sanitary District, 247 Md. 326 , 231 A.2d 40, 44 (1967): ²⁵⁹ In reviewing the Town’s action, it is only necessary that the legislative determination to spend a particular amount of public funds be reasonable and based on an honest judgment of those officials charged with care of the public purse that the expenditure is for the best interests of the city. The Williamsport case can be distinguished from the present case both on the facts and on the law. The expenditure authorized by town officials in Williamsport was an obligation to make payments to the county sanitary district toward the increased costs of constructing the district’s proposed sewerage treatment plant at an alternative location from the site originally chosen.

This expenditure was authorized by town officials in order to avoid a possible threat to the health and welfare of town residents, and as such, was held not to be an ultra vires act. 231 A.2d at 44 . The ‘best interests of the city’ in Williamsport thus involved the avoidance of a substantial threat to the health and welfare of the city residents. Contrary to Defendants’ assertions, an expenditure of city funds to reimburse town officials or employers for the defense of criminal charges of official misconduct does not further the best interests of the city within the meaning of Williamsport v. Sanitary District. The courts as a rule have attempted no judicial definition of a public as distinguished from a private purpose.

See, e.g., Frostburg v. Jenkins, 215 Md. 9 , 136 A.2d 852 (1957). In general, a public purpose has for its objective the promotion of the public health, safety, morals, general welfare, security, prosperity, and contentment of all the inhabitants or residents within the municipal corporation. Seltenreich v. Fairbanks, 103 F.Supp. 319 (D.Alaska), aff'd. 211 F.2d 83 (9th Cir.1954). It is important to keep in mind that the test of public use or purpose is not based upon the function or capacity in which or by which the public use is furnished (i.e., Defendants’ status and function as town mayor and council member).

The right of the public at large to receive and enjoy the benefit of the use determines whether the use is public. Sommers v. City of Flint, 355 ²⁶⁰ Mich. 655, 96 N.W.2d 119 (1959). State ex rel. Gordon v. Rhodes, 156 Ohio St. 81 , 100 N.E.2d 225 (1951); 35 Am.Jur. 734, § 120.

The public money must be spent ‘with a political view for the good government and benefit of the community,’ ... [and bear] ... ‘a substantial relation to the public welfare.’ City of Frostburg v. Jenkins, 214 [215] Md. 9, 136 A.2d 852, 857 (1957), cited with approval in Williamsport v. Sanitary District, supra, 231 A.2d at 43, 44 . It is generally agreed that a municipality has no power to reimburse a town official for his expenses incurred in defending himself from charges of official misconduct. Board of Chosen Freeholders v. Conda, 164 N.J.Super. 386 , 396 A.2d 613 (1978); see 3 McQuillen, Municipal Corporations, (3d ed. 1973 rev.), § 12.137. The rationale behind the rule is that such an indebtedness against a city would constitute the application of money to an individual and not to a city purpose.

See, eg., Chapman v. New York, 168 N.Y. 80 , 61 N.E. 108 (1901). The general rule in Maryland is that public funds of municipalities cannot properly be devoted to private uses, even when expressly authorized by the legislature. City of Frostburg v. Jenkins, 215 Md. 9 , 136 A.2d 852 (1957); Wilson v. Board of County Commissioners, 273 Md. 30 , 327