Recovery of County’s Ultra Vires Payments

At some point, a county’s board or administrators may be faced with complaints from the community about payments made to a private entity. Members of the community (or competitors of the payee) may raise a number of complaints, including:

• payments were made to a friend of a commissioner,
• payments were made without a valid contract,
• the contract was not properly recorded,
• the contract was not effectively approved, or
• the county failed to comply with public works bidding laws.

In light of such complaints, county officials may ask: Should they seek reimbursement? Would a court even permit recovery of such payments?

These questions have been addressed in case law, including the 2003 case of Howard v. Brantley County, 260 Ga.App. 330. In that case, the county made several payments to a contractor even though there was no written contract, and no contract was approved by the county or entered on the minutes. In fact, the county did not publicly bid the work pursuant to the county roadwork statute.

After paying $190,600 to the contractor, the county filed suit for money had and received. At trial, the county moved for summary judgment and won because, among other things, the contract was not publicly bid and was not recorded on the minutes.

Money Had and Received vs. Voluntary Payment Doctrine

The contractor argued that, even if the county did not follow the public works laws, it should be permitted to keep the payments based on the voluntary payment doctrine. In fact, the contractor had precedent showing that this argument was successful against a county in a similar — but still different — situation.

The case, Twiggs County v. Oconee Elec. Membership Corp., 245 Ga.App. 231 (2000), involved a county that made payments for utility relocation despite the absence of any contract. The county paid the full amount due but later decided the payments were improper. Specifically, it argued that the purported contract was void because, among other things, it was not in writing and was not entered on the minutes.

In response, the utility asserted the voluntary payment doctrine as a defense. Ultimately, the court ruled in the utility’s favor — the voluntary payment doctrine prevailed to deny the county’s recovery. As noted below, however, the court recognized the limited scope of its ruling.

Voluntary Payment Doctrine is a Limited Exception

In the Brantley County case, the court reached a different conclusion based on a different set of facts. It ruled that the voluntary payment doctrine did not apply, and that the contractor must return the payments.

The difference in the cases rests on a number of factors outlined in the Twiggs County case. The court listed the following factors in favor of applying the voluntary payment doctrine (against the county):

• the county delayed for more than two years to assert its rights to recovery;
• the county’s failure to record the contract on the minutes was due to the board’s failure to discharge its official duty;
• there was no claim that the county exceeded its authority by entering into the contract; and
• there was no evidence of fraud.

The court also distinguished the circumstances in the Twiggs County case (denying recovery by the county) from an affirmative claim for recovery against the county. For claims of affirmative recovery against the county, the “essential requirements of a valid contract cannot be waived.”

In contrast, the Brantley County case involved an illegal and ultra vires contract because the county failed to comply with the public bidding requirements. Ironically, the court held, “Where public funds are illegally paid out by county officials or by some agency of the county, it is proper for the county to bring a suit for the recovery of same.”

Implications

The above cases illustrate the importance of strictly complying with statutes governing public works and contracting authority. The failure to do so may have disastrous consequences for the county (or other public owner) and the contractor. It not only places the county at risk for claims from the contractor, but also at risk for claims from subcontractors, suppliers, and laborers. While the county in the Brantley County case was successful in recovering the improper payments, the risk arising from non-compliance is far too great to ignore.