Opinion
40463.
DECIDED FEBRUARY 11, 1964.
Complaint. Gwinnett Superior Court. Before Judge Pittard.
Merritt Pruitt, J. Ray Merritt, for plaintiff in error.
Edward S. White, Allen E. Lockerman, Dudley S. Hancock, contra.
The law in this case was made when the case was reviewed by this court on its first appearance here. No facts alleged in the substituted petition require any change in the prior ruling to the effect that the petition stated a cause of action against the plaintiff in error in this case.
DECIDED FEBRUARY 11, 1964.
This is the second appearance of this case in this court insofar as one of the defendants in the trial court, James M. Roberts, is concerned. For ruling on the first appeal see Gwinnett County v. Archer, 102 Ga. App. 813 ( 118 S.E.2d 97). Upon the return of the case to the trial court the plaintiff, Gwinnett County, amended its petition by striking the original petition and substituting in lieu thereof another petition, containing many of the allegations contained in the original petition and other allegations set out hereinafter. In stating the allegations not contained in the original petition there may be some slight duplication in that more changes are made in some instances. The new matter contained in the amended petition is substantially the addition of the following paragraphs, numbered as they are in the substituted petition: "9. On October 4, 1955, defendant commissioners, as the governing authority of Gwinnett County, adopted a resolution, which is recorded on the public records of said county, providing for the issuance of revenue anticipation bonds in the principal sum of $5,925,000 to provide the funds with which to construct or acquire a water system. 10. The principal sum of said revenue anticipation bonds was based on an estimate by said firm of engineers that the cost of said water system would approximate that amount. 11. In computing the cost of establishing said water system said firm of engineers estimated the fees of bond attorneys at $74,062 and the fees of special legal counsel at $74,062. 12. In an official statement made by defendant commissioners on December 28, 1955, the respective fees of bond attorneys and special counsel (for legal services in connection with the establishment of said water system) were estimated as of that date as follows: Bond Attorneys — $74,062; Special Counsel — $74,062. 19. Defendant commissioners informed defendant Roberts when they first employed him that the bond attorneys in connection with said water system project would be the law firm of Spalding, Sibley, Troutman Kelley, of Atlanta, and that the principal responsibility of defendant Roberts would be to negotiate with local town and county officials in and around Gwinnett County and prepare contracts between Gwinnett County and such towns and counties relative to the purchase of water to be supplied by the Gwinnett water system. 20. The legal services customarily rendered by bond attorneys, to wit the services required in authorizing, validating, issuing and selling said revenue anticipation bonds and furnishing legal opinions regarding the use of funds derived from the sale of said bonds, were performed by the law firm of Spalding, Sibley, Troutman Kelley, with some assistance from the said R. F. Duncan and no substantial part of such services was performed by defendant Roberts. 23. When the respective legal fees of bond attorneys and special counsel were estimated at $74,062 in the official statement made by defendant commissioners on December 28, 1955, as alleged above substantially all of the work of the bond attorneys had been completed. 24. By December 28, 1955, the work for which defendant Roberts had been principally employed, that is, to negotiate with local officials and prepare contracts for the purchase of water, as alleged above, had been substantially completed. 26. On June 6, 1956, defendant commissioners paid the sum of $128,000 out of the proceeds of the sale of said revenue anticipation bonds to defendant Roberts by check issued to Cohen, Roberts Kohler, the law firm of which he was then a member. 27. At the time he received said $128,000 defendant Roberts agreed with the defendant commissioners to pay out of said sum: (a) $30,000 to Sumter Kelley, of the firm of Spalding, Sibley, Troutman Kelley, for the legal services rendered by said firm to Gwinnett County in connection with the bonds for the water system project; (b) $15,000 to the said R. F. Duncan for legal services rendered by him to Gwinnett County in connection with the water system project; (c) $1,000 to D. B. Phillips of Norcross, Georgia, for legal services rendered by him to Gwinnett County in connection with said water system project. 28. It was agreed among all of the defendants that after making said payments defendant Roberts would retain the balance of said $128,000, that is, $82,000, for his own use. 30. After the payment of said $128,000 defendant Roberts attended several meetings, the exact number of which is not known to plaintiff, and performed other minor services for which no additional payment was made. The services performed after the date of said payment were not substantial in character. 33. By the terms of Article III, Section 1, of the resolution adopted by defendant commissioners on October 4, 1955, Gwinnett County covenanted that the proceeds of said revenue bonds would be deposited in a special bank account designated "Water System Construction Fund" and in Section 5 of said Article that no checks for the withdrawal of money from said construction fund would be signed until there were filed with the bank depository: (a) A requisition `stating each amount to be paid and the name of the person, firm or corporation to whom payment thereof is due'; and (b) A certificate certifying as follows: `1. That an obligation in the stated amount had been incurred by the county, and that the same is a proper charge against the Construction Fund and has not been paid, specifying the purpose and circumstances of such obligation in reasonable detail and to whom said obligation is owed, accompanied by the bill or statement of account for such obligation, or a copy thereof.' 34. By the terms of Article III, Section 8, of said resolution Gwinnett County covenanted as follows: `During the construction of the system, the county shall cause an audit to be made quarterly by a firm of independent certified public accountants covering all receipts and disbursements relating to the water system and the moneys then on deposit with the Construction Fund Depository and the security held therefor, and the detail of all disbursements from the Construction Fund. . .' 37. No written bill or statement of account was submitted at any time by defendant Roberts or by the law firm of which he was then a member for any services rendered by him to Gwinnett County. 39. At the time defendant commissioners issued the check for $128,000 to Cohen, Roberts Kohler, as alleged above, they failed to file with the bank depository or anywhere else any requisition or certificate showing that a portion of said money would be transmitted to the said Sumter Kelley, R. F. Duncan and D. B. Phillips. 40. Defendant commissioners knew that payment made in this manner to the said Kelley, Duncan and Phillips would not appear on the records of the county or of the bank depository; that no bill or statement of account had been submitted as required by said resolution; and that the true facts in relation to such payments would not appear on the audit reports required by said resolution. 41. Attached to the requisition filed with the bank depository to support said check for $128,000 there was the following certificate by the defendant commissioners: `Check in the amount of $128,000 payable to Cohen, Roberts Kohler is for furnishing legal services — final payment.' 42. Defendant commissioners well known that although the description of said check for $128,000 appearing in said requisition implied and meant that the legal services covered by said check had been rendered by the payee therein, defendant Roberts had agreed with them to transmit $46,000 of the proceeds of said check to the said Kelley, Duncan and Phillips for services rendered by them and not by Roberts or by his law firm. 43. Said requisition and the manner of handling the payment of the funds intended by defendant commissioners for the said Kelley, Duncan and Phillips had the effect of defeating and frustrating the disclosure provisions of said resolution with which Gwinnett County had, through defendant commissioners, covenanted to comply; and said requisition and manner of handling said payment constituted a misrepresentation by defendant commissioners of the identity of the real parties to whom the county was indebted for services and the real recipients of said funds. 44. Said payment of $128,000 to defendant Roberts under the circumstances alleged herein constituted an improper and unlawful delegation by the defendant commissioners of their authority and responsibility to make payments of county funds to the said Kelley, Duncan and Phillips. 45. The $128,000 paid to defendant Roberts constituted, except for the negligible amount of $124, the entire balance of the combined fees of both the bond attorneys and special counsel estimated as late as December 28, 1955; and the final amount retained by defendant Roberts alone, to wit $92,000, was $17,938 more than the $74,062 estimated as the total fees of all special counsel and $36,000 more than the combined fees actually paid to the bond attorneys and the other two special counsel. 46. Defendant commissioners did not at any time obtain from defendant Roberts or prepare for themselves any written description, summary or recapitulation of the service rendered by him or the days or hours devoted by him to legal services rendered in connection with the water system and did not obtain from him any bill or written statement of account or any record of travel or telephone or other expenses incurred by him in the performance of such services. 47. Defendant commissioners did not, before paying said $128,000 to defendant Roberts, make any investigation or outside inquiry as to what would be proper or reasonable compensation for the services of special counsel in the circumstances disclosed by this petition. 48. Since the proceeds of said revenue anticipation bonds constituted a trust fund and defendant commissioners were trustees and fiduciaries, all of the defendants, in determining the amount of compensation to be paid by plaintiff county to and accepted by defendant Roberts, were required by law to exercise the utmost good faith, fidelity and integrity. 49. The payment of $92,000 to defendant Roberts for his own use constituted excessive, unreasonable and arbitrary compensation for services performed by him in connection with the establishment of said water system; and defendant commissioners abused their discretion as trustees in paying said amount. 50. Even if the payment of said $92,000 would not have constituted an abuse of discretion and a misapplication of trust funds by defendant commissioners if they had executed and recorded a written contract of employment as provided by law, had obtained a written bill or statement from Roberts, had complied with the terms of the bond resolution, had made a reasonable investigation of fees payable for similar services in such cases, and had not paid to Roberts money intended for other parties, the payment of said amount in the manner and under the circumstances alleged in this petition, constituted a breach of trust and a misapplication of trust funds. 51. Plaintiff county alleges that even after allowing for the exercise of the discretion of trustees on the part of the defendant commissioners, the reasonable value of all services rendered by defendant Roberts in connection with said water system project could not exceed $50,000. 52. In paying defendant Roberts more than $50,000 in the manner and under the circumstances alleged herein defendant commissioners, who were aware of such facts and circumstances, abused their discretion and committed a breach of trust and were guilty of a misapplication of trust assets in which Roberts participated with knowledge of all the facts. 53. Section 108-423 of the Georgia Code, which was in force and effect at all times mentioned herein, provides as follows: `All persons aiding and assisting trustees of any character, with a knowledge of their misconduct, in misapplying assets, are directly accountable to the persons injured.' 54. By reason of said breach of trust and misapplication of trust assets in which all of the defendants participated as alleged above plaintiff county is entitled to recover the difference between the amounts actually paid to defendant Roberts for his own use and $50,000 to wit $42,000, with interest thereon at the legal rate of 7% per annum since June 6, 1956."
The general and special demurrers of the defendant Roberts were overruled and he excepts to such judgment.
1. The gist of the original petition was that the payment of $92,000 to defendant Roberts under the circumstances alleged was so excessive and unreasonable as to constitute an abuse of discretion and a violation of trust by the defendant county commissioners in which Roberts participated. The gravamen of the cause of action was not that the commissioners authorized Roberts to fix or settle the amount of attorney's fees due the law firm of the late Sumter Kelley and R. F. Duncan. The substituted petition is based on the same theory and principle as the original, and the new allegation that Roberts paid out of a check payable to his firm definite amounts due to the firm above referred to and R. F. Duncan a definite amount due them by the commissioners does not affect the theory, principle and rationale of the original petition. The only questions under the original petition and the substituted petition are whether the commissioners were guilty of an abuse of discretion and a violation of their trust by the payment of $92,000 in fees to Roberts which were alleged to be so excessive as to constitute an abuse of discretion and a violation of trust, and whether Roberts aided and assisted in such misconduct with knowledge thereof. Code § 108-423. There are no new facts alleged in the substituted petition which change or affect the ruling made by this court on the former appearance of the case where we held ( 102 Ga. App. 318): "In spite of the lack of such a standard, if the proof shows that unreasonable and excessive fees were paid to Roberts under the circumstances a recovery is in order if a jury finds the fact of excessiveness to exist to the extent of showing a breach of discretion and trust." No reason is urged or pleaded why the fact that the contract was completely executed by all parties four years prior to the filing of the action precludes this action.
The court did not err in overruling the general and special demurrers to the petition.
Judgment affirmed. Frankum and Pannell, JJ., concur.