Gross v. Kentucky Board of Managers

49 S.W. 458, 105 Ky. 840, 1899 Ky. LEXIS 252

• Court: Court of Appeals of Kentucky
• Decided: February 8, 1899
• Status: Published

Opinions

JUDGE HOBSON

delivered the opinion of the court.

By an act approved January 19, 1893, entitled “An act to provide for the collection and exhibition of the resources and evidences of progress of the- State of Kentucky at the World's Columbian Exposition of 1S93” (see Acts 1891-93, p. 433), the sum of $100,000, or so much of it as might be necessary, was appropriated, out of any money in the treasury not otherwise ap-_ propriated,, for providing a suitable display of the State’s progress, etc., at this exposition. To carry out the work contemplated by the act, a board was created, to be known as “The Kentucky Board of Managers of the World’s Columbian Exposition,” to consist of five members, appointed by the Governor. Each of the board was required to give bond, and enter at once upon the discharge .of liis duties. One of the board was to be elected a president; another a secretary; and when the board was not in session the president might administer its aifairs, subject to its approval. The board was given, power to employ necessary agents and employes. It was required to have a suitable building erected for the Kentucky headquarters, and this building, it was provided, “should contain the necessary restaurant and refreshment accommodations, the same to be let to the highest and best bidder, and the proceeds covered into the treasury of the Kentucky board of managers.” The act did not contemplate the withdrawal of the $100,000 by the board from the treasury, except as it was needed to cover its expenditures, but it at once drew out the whole sum. After this had been done, the General Assembly, by a joint resolution, after reciting the fact that the total amount of the appropriation had been unnecessarily drawn, a considerable part of it remaining unexpended, declared “that the public and all persons interested may have full knowledge in the premises, that the State will not assume the payment or pay any expenses, charges, arrears, or indebtedness, if any, whatsoever that may remain unpaid after the expenditure of the appropriation heretofore made.” See Acts 1891-93, p. 1568.

The board, in order to provide the necessary restaurant and refreshment accommodations, contracted with appellant to carry on the restaurant at the headquarters building, he agreeing to pay it ten per cent, of the gross receipts. On November 7, 1893, appellant filed this suit against the board, praying judgment against it for $5,000 for failing to comply with the contract it made with him, in various particulars set our in his petition. The board filed a demurrer to the petition, which the court below sustained, on the ground that it was only the agent of the State of Kentucky, and so could not be sued. This is the only question raised on this appeal.

The rule is well settled that the State can not be sued, and that the same protection is extended to the officers of the State. But this rule does not apply to a corporation created by the State for certain püblic purposes. If appellee was made by the acts referred to a corporation or a quasi corporation, we see no reason why it should be exempted from the rule allowing suits to be brought against corporations on contracts they have made. So the question is presented whether appellee was invested by the Legislature with the character of a corporation or quasi corporation. It is not necessary that the thing created by the Legislature should be named by it a corporation. Its character depends upon the powers given it, and not upon the name by which the Legislature may call it.

Following a decision of this court, the Supreme Court of the United States, in Hancock v. The Louisville & Nasliville Kailroad Co., 145 U. S., 415, [12 Sup. Ct., 909], said: “By the act of 1869 this prescribed portion of Shelby county was authorized to issue bonds and subscribe stock. The bonds, when issued, were not the obligations of Shelby county, nor of the individual taxpayers, and still there must be some debtor. That debtor was this portion of Shelby county. Giving to it power to issue bonds and create indebtedness is the creation of an entity with power to act, and, if this entity has power to create a debt, it becomes subject to suit. That this entity was not in terms named a corporation is not decisive. It is enough that an artificial entity was created, with power to exercise the functions of a corporation. It was, though not named, a corporate entity.”

In the case at bar the Legislature, by the joint resolution above referred to, expressly declared that the State would not assume any debts of the board. If the State was not the debtor, it must have been contemplated that there was some entity on whom the obligation of these contracts would rest. It is true that the State can not be sued for a debt, but the Legislature may be petitioned to make an appropriation for the payment of the claim. The object of this joint resolution was to have it understood that the State was to be in no way responsible for the obligations of this board, and to forestall all claims, “whether legally enforceable, or merely obligatory in good morals and on the public faith,” as stated in the resolution, and to cut off all applications for their payment by the Legislature. But it can not be presumed that it was contemplated that people who dealt with this board should have no one to look to for the enforcement of their just claims.

The board was authorized to have a house built, and a restaurant run in it, to employ agents and assistants, and to take all necessary steps to have the State properly represented at that exposition. The commissioners clearly were not personally responsible for their obligations, the State expressly declared that it was not to be responsible, and the only reasonable conclusion is that the board of managers, to whom the $100,000 was committed to carry out the object of the act, was intended to be, to the extent of the funds put in its hands, at least a quasi corporation; and, as the power to make contracts is expressly conferred, the power to sue or be sued on these contracts was necessarily vested in the board, for the contracts were the obligations of the board, and not the obligations of the State.

It is true that this board has been called, in an opinion by this court, an “agency of the State.” It was an agency of the State, but it was also vested with corporate powers, and in its corporate capacity it may be sued for its corporate acts, just as any other corporation.

It appears from the petition that a large part of the $100,000 is unexpended, besides the proceeds of the restaurant received from appellant; and there is no reason why this money should not make good to appellant any loss that the board may have inflicted upon him by the breach of contract alleged in the petition.

The board was not created to discharge any governmental function. The erection of a headquarters building and the running of a restaurant were matters of business, in which this board stood on the same plane as others engaged in like undertakings. In sending it to a distant State to carry on business, and absolving the State from all liability, the Legislature must be presumed to intend that the funds in its hands should be subject to its obligations.

In this respect the case at bar is totally different from Williamson v. Louisville Industrial School of Reform, 95 Ky., 251, [44 Am. St., R., 243; 24 S. W., 1065]. There the State had established a charity, and the question was whether the fund on which it depended could be used to make good a tort of an attendant, and the charity in this way impaired or destroyed. The decision is rested on the ground that the trust fund could not be diverted from the use to which the Legislature had devoted it. But here the trust has been performed, and a surplus left. The fund was devoted by the Legislature to the carrying out of this business, and there will be no diversion of it, if applied to the payment of the claims arising out of the business which are justly due.

We have examined the World’s Fair cases in other States cited by counsel. The point raised here was not involved in these or the other cases relied on for appellee.

The judgment of the court below is therefore reversed, with directions to overrule the demurrer, and for further proceedings consistent with this opinion. (See Sinking-Fund Commissioners v. Northern Bank of Ky., 1 Met., 174).

JUDGES GUFFY AND PAYNTER dissent.