Bd. of Com'rs of Redwood Cnty. v. Citizens' Bank of Redwood Falls

• Decision Date: 19 January 1897
• Citation: 67 Minn. 236,69 N.W. 912
• Parties: BOARD OF COM'RS OF REDWOOD COUNTY v CITIZENS' BANK OF REDWOOD FALLS ET AL.
• Court: Minnesota Supreme Court

67 Minn. 236

69 N.W. 912

BOARD OF COM'RS OF REDWOOD COUNTYvCITIZENS' BANK OF REDWOOD FALLS ET AL.

Supreme Court of Minnesota.

Jan. 19, 1897.

(Syllabus by the Court.)

A bank which had been depositary of county funds for one term, about to expire, and which was indebted to the county for money deposited with it during that term, was designated depositary for a second term, and gave to the county a bond, with sureties, conditioned that it would pay on demand all funds “which shall be deposited in said bank pursuant to said designation.” The account between the bank and the county was kept in the form of one open current account. During the second term, from time to time, deposits were made to the credit of the county, and payments made generally to the county on its checks; the amount of these payments during the second term exceeding the amount of the deposits during the same time, leaving a balance still due the county, when the bank failed during the second term. Held, that the sureties were only liable for money deposited during the second term for which their bond was given, but that the relation between the bank and the county was that of debtor and creditor, and that the money deposited with the bank became its property, and all payments made by it to the county were made with its own funds; and, having been paid generally on a single continuous account, the law will appropriate them according to the general rule, viz. the first item on the credit side to discharge or reduce the first item on the debit side; that the sureties have no right to have the payment first applied to discharge the debits created by deposits made during the second term. The case distinguished from those on official bonds where the officer was merely the custodian of public funds, which remained the property of the public, and where he used the public funds which came into his custody during one term to discharge his liability on account of an embezzlement committed by him during a previous term.

Appeal from district court, Redwood county; B. F. Webber, Judge.

Action by the board of county commissioners of Redwood county against the Citizens' Bank of Redwood Falls, W. T. Donaldson, and others. A verdict was directed for defendants W. T. Donaldson and others, and from an order denying a new trial plaintiff appeals. Reversed.

H. W. Childs, Atty. Gen. Geo. B. Edgerton, Asst. Atty. Gen., Arthur M. Wickwire, and Frank Clague, for appellant.

B. H. Schriber and Somerville & Olson, for respondents.

MITCHELL, J.

This action was brought on a bond given May 2, 1894, by the defendant bank as a depositary of county funds, pursuant to the provisions of Gen. St. 1894, §§ 730, 731. The bond, after reciting that the bank had been duly designated as a depositary of the funds of the county for the term of two years from the date thereof, and had agreed to pay interest thereon at 2 per cent. per annum on monthly balances, was conditioned that it “shall well and truly credit such interest on such monthly balances to said county, and shall well and truly hold such funds, with accrued interest, subject to draft and payment at all times on demand, and shall well and truly pay over on demand, according to law, all of said funds which shall be deposited in said bank pursuant to said designation and said statutes aforesaid, and all of the interest so to be credited.” During the life of the bond the bank became insolvent, and made an assignment for the benefit of its creditors. At this time it was indebted to the county for county funds deposited with it in the sum of $3,642.74, which, not having been paid on demand, is sought to be recovered from the sureties on the bond. The court directed a verdict in favor of the sureties upon the evidence, which disclosed the following state of facts: The bank had been designated depositary of county funds for the two years immediately preceding, and as such was indebted to the county in the sum of $5,341.79 for moneys deposited with it during that term. This first term being about to expire, and a second term, under a new designation, about to begin, for which a new bond was to be executed, the county treasurer and the officers of the bank made an arrangement by which the former drew his check on the bank for the amount of this balance, and received in exchange therefor a draft on New York for an equal amount, with the understanding that he should never present or forward it for payment, but should hold it until after the new bond was delivered and approved, and then redeposit it to the credit of the county. Defendant bank had no funds in the hands of the drawee with...