Montgomery County v. Cochran

• Decision Date: 03 March 1903
• Docket Number: 1,205.
• Citation: 121 F. 17
• Parties: MONTGOMERY COUNTY v. COCHRAN et al.
• Court: U.S. Court of Appeals — Fifth Circuit

121 F. 17

MONTGOMERY COUNTY v. COCHRAN et al.

No. 1,205.

United States Court of Appeals, Fifth Circuit.

March 3, 1903

William L. Martin (John G. Finley and Jesse F. Stallings, on the brief), for plaintiff in error.

Edgar H. Gans (Thos. H. Watts, Alexander Troy, Thomas A. Whelan Gordon McDonald, William W. Hill, and Willy C. Hill, on the brief), for defendants in error.

This suit was brought in the city court of Montgomery, Ala., by the county of Montgomery against John J. Cochran, a citizen of Alabama, and the Fidelity & Deposit Company of Maryland, a corporation chartered under the laws of Maryland. It was removed to the Circuit Court of the United States for the Middle District of Alabama on the application of the Fidelity & Deposit Company on the ground of prejudice and local influence. 116 F. 985. The action is on Cochran's bond as treasurer of Montgomery county.

On being elected treasurer of Montgomery county, John J. Cochran gave bond payable to the county for $120,000. The Fidelity &amp Deposit Company of Maryland became his only surety. The condition of the bond is, as provided by statute (Code Ala. 1896, Sec. 3070): 'Now, if the said John J. Cochran shall faithfully discharge the duties of such office during the term he continues therein, or discharges any of the duties thereof, then the above obligation to be void, otherwise to remain in full force and effect.'

On September 1, 1900, Cochran, with approval of his surety appointed John P. Kohn his agent, deputy, or attorney in fact by a power of attorney, conferring on him power 'to receive and receipt for, in my name, all moneys coming in my possession as treasurer of the county of Montgomery, Ala., and in my name, as treasurer, to pay out all money required by law to be paid by me upon checks signed by the clerk of the board of revenue of said Montgomery county; and, further, to make reports, keep all books required by law to be made or kept by me as such county treasurer, and to do and perform all acts and things I might lawfully do in my own name as such county treasurer; and I hereby ratify and confirm all the acts and things that may be done by the said John P. Kohn, acting as my agent, under the authority of this power, as if the same were done in person by myself.'

John P. Kohn was an employe of the banking house of Josiah Morris & Co., which banking business was conducted by F. M. Billing. On December 13, 1900, the Legislature passed an act to authorize the board of revenue of the county to issue bonds of the county for an amount not to exceed $100,000 for improving the public roads. The fourth section of the act provides 'that the board of revenue of said county are hereby authorized to negotiate and sell such bonds as are issued by them by virtue of this act, but said bonds shall not be sold for less than par (100 cents on the dollar), and the proceeds of said bonds shall be paid over to and kept by the treasurer of said county and applied to pay for the building of and improving the public roads of the county upon a permanent and well-considered system, and for erecting bridges in said county; such use, payment and application of said proceeds to be under the direction and by authority of said board of revenue of said county of Montgomery, and the said county treasurer to be responsible for the safe-keeping of all the proceeds accruing from the sale of said bonds, which may come into his hands in his official capacity, the same as for other county funds or money in his hands as such treasurer; and there shall be no commissions paid said county treasurer for disbursing the funds accruing from the sale of the bonds named in this act. ' Acts Ala. 1900-01, p. 703.

Under the authority of this act, the board issued $100,000 of negotiable coupon bonds payable to bearer, and sold them January 8, 1901, to Josiah Morris & Co. for $111,109.58. The bonds were held by and under the control of the board. Charles A. Allen was the clerk of the board. Seeking to obtain possession of the bonds, John P. Kohn tendered to the clerk of the board the check of Josiah Morris & Co. for $111,109.58 on the bank of Josiah Morris & Co., and the clerk declined to receive the check for the bonds. Kohn then left the presence of the clerk, and later returned, and presented to him this receipt:

'The State of Alabama, Montgomery County.

'Office of County Treasurer,

'No. 507, Montgomery, Ala., Jan. 8th, 1901.

'Received from board of revenue of county $111,109.58, proceeds sale $100,000 bonds.

John. J. Cochran, County Treasurer, 'By John P. Kohn, His Atty.'

On presentation of this receipt, the bonds were delivered to John P. Kohn, who carries them to the banking house of Josiah Morris & Co., and delivered them to F. M. Billing. They were immediately sold, and are outstanding against the county. Kohn testified as to the disposition of the check: 'I indorsed the check, 'John J. Cochran, County Treasurer, by John P. Kohn, His Attorney in Fact,' and made out a deposit slip for the amount of the check to the credit of John J. Cochran, County Treasurer, Road and Bridge Fund,' and turned the check and deposit slip in to the receiving teller of the bank for him to make the entries, and the amount was accordingly credited to said Cochran as treasurer on the books of the bank as 'Road and Bridge Fund.' Nothing else was done toward paying that check, except these entries. At the same time, as the attorney in fact of the said treasurer, Cochran, I made an entry on the cashbook of the county treasurer, charging said treasurer with said amount as received from the board of revenue as the proceeds of the sale of $100,000 of road and bridge bonds. No money actually passed as between said Josiah Morris & Co. and said board of revenue and said treasurer, but the check was drawn, indorsed, and the amount placed to the credit of the said Cochran, as I have stated. All this occurred on the afternoon of the 8th of January, 1901.'

Seventeen days after these transactions, on January 25, 1901, the bank closed its doors, and remains suspended. Before the bank was closed, on and after January 8th, warrants to the amount of $4,769.00, drawn by the treasurer on the road and bridge fund, were paid at the bank.

At the time the check was deposited the actual amount of cash in bank was about $35,000. On the trial the plaintiff offered to prove that at the time the check was deposited the banking house of Josiah Morris & Co. had, together with the cash on hand, available assets in the bank and in New York sufficient to pay the check; but the court, after being informed by counsel for plaintiff that they did not propose to prove that any money was actually set aside and separated from the other assets of the bank, so that the title thereto vested, on motion of the defendant excluded this evidence. The plaintiff further offered to prove that the bonds were immediately, upon their purchase by said Josiah Morris & Co., sent to New York, and a cash credit obtained two days later on them of $95,000 by Josiah Morris & Co.; but the court, on motion of the defendants, excluded this testimony. On February 12, 1901, Cochran made a report to the grand jury of the county showing that he had received from the sale of bonds $111,109.58; but this report was excluded as evidence against the company, Cochran having testified that no money was actually received by him.

It was agreed in open court that, at the time of the failure of Josiah Morris & Co., January 25, 1901, there was on deposit of the general fund of the county, and two or three small special funds about which there is no dispute, not taking into consideration any of the proceeds of the sale of $100,000 of road and bridge bonds, the sum of $32,221.80, and the defendants admitted in open court that the plaintiff was entitled to recover in this action $32,221.80, together with the further sum of $4,648.12, the interest thereon making a total of $36,869.92.

The Alabama statutes provide that the condition of official bonds shall be 'faithfully to discharge the duties of such office during the time he continues therein or discharges any of the duties thereof. ' Code 1896, Sec. 3070. 'Every official bond is obligatory on the principal and sureties thereon: (1) For any breach of the condition during the time the officer continues in office, or discharges any of the duties thereof. (2) For the faithful discharge of any duties which may be required of such officer by any law passed subsequently to the execution of such bond, although no such condition be expressed therein. (3) For the use and benefit of every person who is injured, as well by any wrongful act committed under color of his office, as by his failure to perform, or the improper or neglectful performance of those duties imposed by law. ' Id. § 3087. It is the duty of the county treasurer to receive and keep the money of the county, and disburse the same according to law.' Id. § 1429.

The complaint, as amended, contained nine counts. Each of them contained a statement of the material facts; in some of them a condensed statement, and in others a full and elaborate statement. The breach of the bond in the first five counts and in the seventh count is the deposit of the money, the proceeds of the bonds, in bank, whereby it was lost. These counts suggest the contention that the treasurer, by the deposit, had converted the fund, and that the conversion was a breach of the bond, and that, the money having been lost by the failure of the bank, there was a breach of the undertaking to safely keep the money. The sixth count avers that there was a breach of the bond, in this: that the treasurer represented that the purchase price of the bonds was paid to him as treasurer, when in fact no part thereof had been...