Bannock County v. Citizens Bank and Trust Company

Citation22 P.2d 674,53 Idaho 159
Decision Date19 May 1933
Docket Number5919
PartiesBANNOCK COUNTY; LAURA B. BERG, in Her Capacity as Treasurer of Bannock County, Idaho, and in Her Capacity as Public Administratrix of Bannock County, Idaho; C. A. BROWN, in His Capacity as Assessor and Tax Collector of Personal Property of Bannock County, Idaho; W. H. WOODWARD, in His Capacity as Sheriff of Bannock County, Idaho; and the AETNA CASUALTY AND SURETY COMPANY, a Corporation, Appellants, v. CITIZENS BANK AND TRUST COMPANY, a Corporation; BEN DIEFENDORF, as Commissioner of Finance of the State of Idaho; and H. A. COLLINS, as Liquidating Agents in Charge of the Affairs of Said Citizens Bank and Trust Company, Respondents
CourtIdaho Supreme Court

COUNTIES-PUBLIC DEPOSITORY LAW-CONSTITUTIONAL LAW.

1. County treasurer's general deposit in bank of county funds subject to check is not "loan" prohibited by statute or Constitution (Const., art. 8, sec. 4, art. 12 sec. 4).

2. Language of Constitution must be taken in its natural ordinary, general and popular sense.

3. Constitutional section, providing that no county shall "lend or pledge the credit or faith thereof" or "loan its credit" to any individual, association or corporation, prohibits transactions creating customary relation of borrower and lender (Const., art. 8, sec. 4, art 12, sec. 4).

4. Court must give practical effect to language of Constitution.

5. Statute will not be held unconstitutional, unless clearly so and doubt as to its constitutionality must be resolved in its favor.

6. Legislative construction of constitutional provision, meaning of which is doubtful, will be given serious consideration by courts.

7. Validity of statute will be presumed until its unconstitutionality is proved beyond all reasonable doubt.

8. Public Depository Law and statute authorizing general deposits of public moneys in bank held constitutional (I. C. A., sec. 25-915, subd. 3, sec. 55-101 et seq.).

APPEAL from the District Court of the Fifth Judicial District, for Bannock County. Hon. Robert M. Terrell, Judge.

Suit by Bannock County and certain of its officials against the Citizens Bank and Trust Company and others, to have certain public moneys adjudged to be held in trust, and to impress the assets of that bank with such trust. Judgment for defendants. Affirmed.

Judgment affirmed, with costs to respondents.

Coffin & Zener and Isaac McDougall, for Appellants.

The primary question of law in this case is that of the constitutionality of subdivision 3 of section 77, chapter 133 of the Session Laws of the state of Idaho, 1925. It is our contention that the above section is unconstitutional in so far as it may be designed and intended to apply to the deposit of public money.

Prior to the enactment of the laws governing the depositing of public funds in Idaho, this court has consistently held that public funds could be deposited only as a special deposit, and, as such, constituted a trust fund in the event of the insolvency of the depository. (State v. Thum, 6 Idaho 323, 55 P. 858; sec. 8379, subd. 4.)

The depositing of public funds on general deposit creates the relationship of creditor and debtor between the bank and the depositing unit, and any attempt to create such a relationship between a county, state or municipality and a bank, corporation or individual, either by act of legislature or by the act of an official of a county, is unconstitutional and void. (Atkinson v. Board of Commrs., 18 Idaho 282, 108 P. 1046, 28 L. R. A., N. S., 412; Fluharty v. Board of County Commrs., 29 Idaho 203, 158 P. 320; School District No. 8 v. Twin Falls Ins. Co., 30 Idaho 400 164 P. 1174; Boise Payette Lumber Co. v. School Dist. No. 1, 46 Idaho 403, 268 P. 26.)

The payment of public funds to general depositors of a bank is a lending of the credit of the county to the bank and a donation of moneys to the depositors in violation of article 8, section 4, and article 12, section 4, of the Constitution of Idaho.

B. W. Davis, for Respondents.

Subdivision 3 of section 77 of chapter 133 of the 1925 Session Laws, and chapter 256 of the 1921 Session Laws of Idaho, as amended, are constitutional in so far as public funds deposited subject to the depository law of this state are concerned. (Independent School Dist. No. 1, Bear Lake County, v. Porter, 46 Idaho 150, 266 P. 1098; Pocatello v. Fargo, 41 Idaho 432, 242 P. 297; 18 C. J. 581; Steed v. Henry, 120 Ark. 583, 180 S.W. 508.)

A general deposit under authority of law such as the Public Depository Act of Idaho is not a loaning of the public credit or a pledging of the credit or faith of the county in aid of any individual association or corporation in violation of either article 8, section 4 or article 12, section 4, of the Constitution of the state of Idaho. (Lawson v. Baker, (Tex. Civ. App.) 220 S.W. 260; People v. McKinney, 10 Mich. 54; Moulton v. McLean, 5 Colo. App. 454, 39 P. 78; 7 C. J. 642, sec. 326.)

The deposit of public funds by Bannock county and the taking of securities to protect the same under the State Depository Law was and is a waiver of any right to preference over common depositors. (Ford v. State, (Ark.) 53 S.W.2d 603; Leach v. Exchange State Bank, 200 Iowa 185, 203 N.W. 31; Maryland Casualty Co. v. Rainwater, 173 Ark. 103, 291 S.W. 1003, 51 A. L. R. 1332.)

HOLDEN, J. Budge, C. J., and Givens, Morgan and Wernette, JJ., concur.

OPINION

HOLDEN, J.

This is a suit to have certain public moneys deposited by the Treasurer, Public Administratrix, Tax Collector and Sheriff of Bannock county, Idaho, in the now defunct Citizens Bank and Trust Company, adjudged to be trust funds, and as such entitled to preference in the liquidation of that bank, and to impress the assets of the bank with such trust. The Citizens Bank and Trust Company was engaged in a general banking business at Pocatello, Idaho, and was a lawfully designated and qualified depository of public funds. These officials deposited certain public funds in that bank on general deposit. September 22, 1931, the bank failed and the Commissioner of Finance of the State of Idaho took charge of its assets and affairs for the purpose of liquidating the bank. Thereafter claims for the amounts on deposit on that date to the credit of such officials were presented by them, respectively, demanding that the claims be classified as trust funds and allowed and paid as such, in the order provided by chapter 133, 1925 Session Laws, section 77, subdivision 2 (sec. 25-915, I. C. A.). January 22, 1932, the Aetna Casualty and Surety Company, pursuant to demand and under the obligation of a depository bond theretofore given by it in the penal sum of $ 15,000, paid Bannock county and took an assignment for the amount so paid, to wit, $ 15,000. February 2, 1932, the said claims were disallowed. In addition to that bond, the deposits were protected by various securities. February 14, 1932, this suit was commenced. By the complaint the appellants by appropriate allegations sought to have all public moneys on general deposit by the above-named officials on the day the Citizens Bank failed adjudged and held to be trust funds, and to have all the assets of the bank impressed with such trust. The respondents demurred to the complaint generally upon the ground that it did not state facts sufficient to constitute a cause of action, and also specially. The demurrer was argued by counsel for the respective parties, submitted to the court for decision, sustained and appellants given ten days within which to amend. The appellants declined to plead further, and on May 5, 1932, judgment was entered dismissing the complaint. This appeal is from the judgment.

The real and controlling question for determination in the instant case goes to the constitutionality of our Public Depository Law. We deem that question to be decisive, and that appears to be the view of both appellants and respondents, and each have filed very able and exhaustive briefs.

From territorial days down through statehood until 1905, the law did not authorize the depositing of public moneys in any bank, otherwise than on special deposit. In that year the first public depository law was enacted making provision for and regulating the depositing of public moneys on general deposit in banks by county treasurers. That statute has been amended to include counties, municipal corporations of every kind and class, school districts, irrigation districts, stumpage, highway, drainage and good road districts, and all quasi-municipal districts.

During the period depositing public moneys in any bank, except on special deposit, was prohibited by law, State Treasurer Storer deposited public moneys with C. Bunting and Company bankers, on general deposit. The bank failed with a large amount of state money in its vaults. Then followed the suit of the First National Bank of Pocatello against C. Bunting and Company, bankers, in the district court of Bingham county, in which C. E. Thum was appointed receiver. The State ex rel. State Auditor and Attorney General filed a petition claiming a trust as to all the public moneys on general deposit in that bank at the time of its failure. On the trial, a motion for a nonsuit was granted against the state and judgment entered dismissing the petition. On appeal to this court (State v. Thum, Receiver, 6 Idaho 323, 55 P. 858) the respondent contended that a general deposit created the relation of debtor and creditor, and was, in legal effect, a loan to the bank, which could be made only by legislative authority, if at all, and that public money deposited in a bank on general deposit became the estate and property of the bank. The record shows that the opinion of this court was based solely on the construction of sections 6975, 6976 and 6977 of the 1887 Revised...

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