Could Damascus city council members be personally sued if they spent city funds the way state law required them to, but the state law later turned out to be unconstitutional?

Plain-English summary

The City of Damascus, Oregon spent years caught in a disincorporation fight. In 2013, 63 percent of voters voted to disincorporate, but city officials interpreted state law to require a majority of all registered voters (not just those who voted), and a court agreed that disincorporation hadn't passed. The 2015 Legislature responded with HB 3085 and HB 3086, which lowered the threshold to a simple majority and, if voters approved, required the city to wind down by paying off debts and refunding remaining money to property taxpayers.

City officials had been told they could be personally liable if a court later found those bills unconstitutional and they had already spent city money under them. Representative Kennemer asked the AG whether that risk was real.

Attorney General Ellen F. Rosenblum's office answered no. ORS 294.100 makes officials personally liable for spending public money for purposes "other than authorized by law" if the spending constitutes malfeasance or willful neglect. Spending city money in the manner required by HB 3085 and HB 3086 is itself an authorized purpose, because those bills were duly enacted by the Legislature. There is no general doctrine requiring officials to second-guess statutory constitutionality before complying. Burt v. Blumenauer did not change that result, because Burt involved an expenditure that an otherwise broad authority statute did not specifically require, and that another statute prohibited.

On a possible Oregon Tort Claims Act claim, the AG said an ORS 294.100 violation is not itself a tort claim. If someone sued officials for implementing HB 3085 or HB 3086 on the theory that the laws were unconstitutional, the AG said ORS 30.265(6)(f) would provide immunity for acts under apparent legal authority unless done in bad faith or with malice.

Currency note

This opinion was issued in 2016. Subsequent statutory amendments, court decisions, or later AG opinions may have changed the analysis. Treat this page as historical context, not current legal advice. Verify current law before relying on any specific rule, deadline, or remedy mentioned here.

Historical summary

The Damascus disincorporation saga

In 2013, 63 percent of Damascus voters supported disincorporation. The city argued, and Hawes v. City of Damascus affirmed, that the controlling state law required a majority of registered voters (the higher bar), so disincorporation failed. The Legislature in 2015 passed HB 3085 (lowering the bar to a simple majority for Damascus) and HB 3086 (specifying how city funds were to be wound down if voters approved disincorporation).

Why officials worried

Damascus officials feared that if they spent city money pursuant to HB 3085/3086 and someone later challenged the statutes as unconstitutional, they could be sued personally for ultra vires expenditures. The fear is not entirely irrational, because Burt v. Blumenauer held that public officials could be personally liable under ORS 294.100 for spending county money to oppose a ballot measure even though general expenditure authority statutes seemed to permit it.

How the AG distinguished Burt

The AG read Burt as a case where general expenditure authority was constrained by another specific statute that prohibited the particular expenditure. HB 3085/3086 are different: they expressly require the expenditure. Compliance with a duly enacted statute is, by definition, authorized by law. Compliance also cannot be malfeasance or willful neglect, the second prong of ORS 294.100. The AG cited Li v. State of Oregon for the proposition that elected officials' oaths to uphold the constitution do not let them second-guess statutes by refusing to act under them.

What this meant for the officials

The AG concluded that Damascus officials would not incur personal liability under ORS 294.100 merely by spending city funds as HB 3085 and HB 3086 required. It separately identified the limits of Tort Claims Act immunity, including bad faith or malice. The opinion says it is solely for Representative Kennemer's use and benefit and “cannot be relied on as advice by local government officials.”

Common questions

Q: Can a public official refuse to comply with a state law they think is unconstitutional? A: Generally no, under Oregon law as cited in this opinion. Officials swear to uphold both state and federal constitutions, but that oath does not give them authority to disregard duly enacted statutes based on their own constitutional opinion. Constitutional challenges go through courts.

Q: When can an official be personally liable for spending public money? A: Under ORS 294.100, when the expenditure is for a purpose not authorized by law AND the expenditure constitutes malfeasance in office or willful or wanton neglect of duty. Both prongs must be met.

Q: What is the Oregon Tort Claims Act's role?
A: The opinion says an ORS 294.100 violation is not an OTCA tort claim. If a damages claim were based on officials' implementing laws later held unconstitutional, the AG said ORS 30.265(6)(f) would apply: it grants immunity for acts under apparent legal authority unless the act was done in bad faith or with malice.

Q: Did Damascus actually disincorporate?
A: The legal and political process around Damascus continued past this opinion. For current city status, consult county records.

Background and statutory framework

ORS 294.100 imposes personal civil liability on public officials who expend public money for unauthorized purposes when the expenditure is malfeasance or willful neglect. The provision protects both public funds and the discretion of officials. Both prongs are required.

Burt v. Blumenauer (1984) is the most-cited Oregon authority on personal liability under § 294.100. It involved Multnomah County commissioners' use of county funds to oppose a fluoridation ballot measure. The court found liability where general expenditure authority did not specifically authorize the spending and another statute (the analog of ORS 260.432) prohibited it.

Citations and references

Statutes:

• ORS 294.100 (personal liability for unauthorized expenditures)
• HB 3085 / HB 3086 (2015 Regular Session) (Damascus disincorporation)

Cases:

• Burt v. Blumenauer, 299 Or 55 (1984)
• Hawes v. City of Damascus, 271 Or App 590 (2015)
• Li v. State of Oregon, 338 Or 376 (2005)

Source

• Index page: https://www.doj.state.or.us/oregon-department-of-justice/office-of-the-attorney-general/attorney-general-opinions/
• Original PDF: https://www.doj.state.or.us/wp-content/uploads/2016/04/op8290.pdf

Original opinion text

Best-effort transcription from a scanned PDF. Minor errors may remain — the linked PDF is authoritative.

FREDERICK M. BOSS

ELLEN F. ROSENBLUM
DEPUTY ATTORNEY GENERAL

ATTORNEY GENERAL

DEPARTMENT OF JUSTICE

Justice Building
1162 Court Street NE
Salem, Oregon 97301-4096
Telephone: (503) 378-4400

April 18, 2016

No. 8290

This opinion answers a question posed by Representative Kennemer concerning whether the mayor and city council members of the City of Damascus would risk personal liability for expending funds in the manner required by House Bills 3085 and 3086 (2015). Below, we first set out your question and our short answer, followed by our analysis. We emphasize that in accordance with ORS 180.060(2), our legal opinions are solely for Representative Kennemer’s use and benefit, and cannot be relied on as advice by local government officials.

QUESTION

Would the mayor and city council members of the City of Damascus be personally liable either under ORS 294.100 or the Oregon Tort Claims Act for expending city funds in the manner required by House Bills 3085 and 3086?

SHORT ANSWER

No.
: DISCUSSION

I. Background

In 2013, sixty-three percent of Damascus voters voted for disincorporation of the city. City officials interpreted state law to require a majority of all registered voters to approve disincorporation and concluded that the election results did not meet that requirement. A trial court agreed with the city’s interpretation and the Oregon Court of Appeals affirmed without opinion. Hawes v. City of Damascus, 271 Or App 590, 354 P2d 774 (2015).

In 2015, the Oregon Legislative Assembly enacted House Bill 3085, and referred that bill to Damascus voters for their approval or rejection. Or Laws 2015, ch 603. The bill permits disincorporation by simply majority vote. If the voters approve disincorporation, House Bills

3085 and another House Bill enacted in 2015, HB 3086, require the City of Damascus to expend city funds to satisfy outstanding legal debts and obligations and to return any excess moneys to ad valorem property taxpayers of the city. Jd, Or Laws 2015, ch 637.

Representative Kennemer informs us that the mayor and city council members have been told that they risk personal liability for expending funds as directed by HB 3085 and 3086 if a court later determines those bills to be unconstitutional. We understand the potential constitutional issue to relate to the legislature’s authority to enact the legislation rather than to the expenditure provisions in particular. Representative Kennemer tells us that he is not aware of any current legal challenge to either law.

II. ORS 294.100

We first look to ORS 294.100, under which public officials may be personally liable for expending public moneys either in excess of the amounts authorized by law, or for purposes other than those authorized by law. Because the question posed involves public officials’ authority to expend funds as specifically directed by House Bills 3085 and 3086, we consider only the “unauthorized purposes” prong of ORS 294.100.

A. Criteria for personal liability

Under ORS 294.100(1) makes it unlawful for public officials to expend money for unauthorized purposes. ORS 294.100(2) provides, in pertinent part:

(2) Any public official who expends any public moneys * * * for any other or different purpose than authorized by law shall be civilly liable for the return of the money * * * if the expenditure constitutes malfeasance in office or

willful or wanton neglect of duty.

To be personally liable under that section, a public official must expend public moneys for a purpose not authorized by law and the expenditure must constitute malfeasance in office or

willful or wanton neglect of duty.

1. Purposes authorized by law

_ HB 3085 and HB 3086 require city officials to make certain expenditures. See Or Laws 2015, ch 603, § 1(1)(a) (providing that the “City of Damascus shall * * * [e]xpend moneys in the — funds of the city to satisfy all debts, obligations, liabilities and expenses of the city[.]”); Or Laws 2015, ch 637, § 1(1)(a) (providing that the “City of Damascus shall expend moneys in the funds of the City” in specified ways). City officials who expend funds in the manner required by those laws would expend funds for authorized purposes. Those expenditures, therefore, would not meet the first criteria for personally liability, that the expenditures be “for any other or different

purpose than authorized by law][.]”

Nothing in the language of ORS 294.100(2) or any other law of which we are aware suggests that a public official must determine that a duly-enacted statute requiring certain © expenditures is constitutional before relying on the expenditure authority it provides. It is in

• fact questionable whether city officials éould elect not to make the expenditures directed by

~ HB 3085 and 3086 simply because they thought the bills might be unconstitutional. See Li v. State of Oregon, 338 Or 376, 396, 110 P3d 91 (2005) (explaining that Oregon Constitutional requirements that elected officials swear to uphold state and federal constitutions does not imply authority to prescribe remedies for perceived constitutional shortcoming without regard to the scope of the official’s statutory authority to act) (emphasis in original). Nor is

• this a case where a specific expenditure potentially authorized under the broad expenditure
  authority provided by one statutory provision is prohibited by another statutory or constitutional provision. See Burt v. Blumenauer, 299 Or 55, 699 P2d 168 (1984) (holding that public officials could be held personally liable under ORS 294.100 for expending funds to oppose ballot measure, because although expenditure was otherwise authorized under county commissioners’ broad expenditure authority, that authority was limited by other law prohibiting expenditures for certain government speech).

2. Malfeasance in office or willful or wanton neglect of duty

Nor would expending funds as required by HB 3085 and 3086 meet the second criterion for personal liability, which is that the expenditure “constitute[] malfeasance in office or willful or wanton neglect of duty.” This criterion was added to the statute in 2001 changing the former strict liability standard to one requiring malfeasance in office or willful or wanton neglect of duty.

Or Laws 2001, chapter 399. While “malfeasance in office” and “willful or wanton neglect of duty” obviously are higher standards than mere negligence, we need not explore their precise parameters as a public official who does nothing more than what the law expressly requires him to do clearly does not commit malfeasance in office or willfully or wantonly neglect his duty.

We conclude that Damascus officials would not incur personal liability under ORS 294.100 merely for expending city funds as required by HB 3085 and 3086.

B. Advice of counsel defense to action for unlawful expenditure of public funds

We also point out that a public official may avoid personal liability for an otherwise unlawful expenditure of public funds under ORS 294.100 if the official relies in good faith and without personal benefit upon the advice of counsel, whether public or private.

Belgarde v. Linn, 205 Or App 433, 440, 134 P3d 1082 (2006) (so holding).

If. Oregon Tort Claims Act

You also ask whether city officials could carry out the directives of HB 3085 and 3086 without risking tort action. Violations of ORS 294.100 are not tort claims within the meaning of . the. Oregon Tort Claims Act, ORS 30.260 to 30.300. See Burt v. Blumenauer, 87 Or App 263, 265, 742 P2d 626 (1987) (so holding). Although we have difficulty conceiving what the tort might be, if any person did assert a tort claim for damages against Damascus officials based on the

officials’ implementation of HB 3085 and 3086 on the ground that those laws are unconstitutional, ORS 30.265(6)(f) would apply. ORS 30.265(6)(f) grants immunity from liability to officers for a claim “arising out of an act done * * * under apparent authority of a law, * * * that is unconstitutional * * * except to the extent that they would have been liable had the law been constitutional * * * unless such act was done or omitted'in bad faith or with malice.”

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ELLEN F. ROSENBLUM
Attorney General

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