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Supreme Court of Oklahoma Rules Compulsory Debt to Be Paid by Appropriation

The Supreme Court of Oklahoma affirmed a trial court’s ruling granting summary judgment to Armor Correctional Health Services for the award of payment for medical services provided to Oklahoma prisoners and detainees. The court retained the appeal so that it could address the public interest issue concerning services mandated by the Oklahoma Constitution.

Armor, a Florida based contractor, entered an agreement with the Board of Commissioners of Oklahoma County to provide medical services for the county’s prisoners and detainees from January 2014 through June 2015. After Armor had fulfilled its obligations, the county refused to make its payments. Armor was forced to file a lawsuit seeking the payment of medical services already provided.

The county admitted it had entered an agreement, and it had failed to pay over $3 million dollars of that bill. It argued that no judgment could be entered because Armor had failed to prove availability of funds to pay the bill. Such proof was required by 62 O.S. 2001 §§3621 and 3632, which govern claims involving government contracts. Armor argued that judgment was proper based on the evidence presented in its summary judgment materials. It also argued that the suit was not based on “indebtedness”, as governed by §§ 362 and 363, but as expenses incurred in the fulfillment of a governmental function mandated by the Oklahoma Constitution, Article 10, § 26 did not apply.

The trial court reviewed the motion for summary judgment and held Article 10, § 26, indebtedness, did not apply.  However, it found that Armor did show that a legal debt did exist and, per the contract with the county, the county had the source and means to pay the bill. The trial count ruled that where Armor had made a prima facie showing of availability of funds, the burden shifted to the county to prove unavailability of the funds. The county argued a revenue failure in the sheriff’s budget. The court disagreed because funds were available in other general revenue accounts, and the government had a duty to compensate its vendors so that they too could meet their financial obligations.

The county appealed to the Supreme Court of Oklahoma. It moved the court to find that the evidence provided by Armor did not prove availability of funds where the sheriff’s office had declared a revenue failure. The Supreme Court agreed with the trial court that the evidence proved a legal debt existed and the contract and other documents stated where the funds would come from and that the county had the funds available to meet the financial obligation. The problem, the county said, was not an inability to pay the debt, but a choice not to pay.

The Supreme Court also affirmed on reasons other than the trial court. It retained jurisdiction to address Armor’s argument that the debt at issue was a “compulsory” debt premised on financial obligations mandated by the Oklahoma Constitution. Armor argued that a compulsory debt is exempt from Article 10, § 10, § 26 on §§ 362 and 363. The court ruled that this issue warrants separate redress as a matter of public interest. The court relied on its ruling on Smartt v. Board of County Commissioners of Craig County, 1917 OK 590, 169 P. 1101, to conclude that it has excluded debts based on a constitutional government function to exempt review under Article 10, § 26.

The court distinguished this cause from Smartt, because in Smartt the sheriff sought to obtain funds from another department but could not because no funds were available. In this case, the funds were available but simply withheld. So, there was no need to exempt Article 10, § 26 exception. The court needed only to determine if the compulsory debt included items and amounts that were reasonable, proper, and necessary. Because nothing in the record suggested the medical services provided were not reasonable, proper, or necessary, the court held that appropriation of funds to pay for the constitutional duty was warranted. The trial court’s ruling was affirmed.

See: Armor Correctional Health Services v. The Board of County Commissioners of Oklahoma County, 2017 OK 49. P.2d (Ok. 2017)

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Related legal case

Armor Correctional Health Services v. The Board of County Commissioners of Oklahoma County