Blaine County v. Fuld

• Decision Date: 26 March 1918
• Citation: 171 P. 1138,31 Idaho 358
• Parties: COUNTY OF BLAINE, Appellant, v. JOSEPH FULD, E. W. KLEINMAN and WM. L. LEONARD, as Receivers of IDAHO STATE BANK, E. B. JOHNSON, as Treasurer of Blaine County, Idaho, and SCHOOL DISTRICT No. 7, BLAINE COUNTY, IDAHO, Respondents
• Court: Idaho Supreme Court

171 P. 1138

31 Idaho 358

COUNTY OF BLAINE, Appellant, v. JOSEPH FULD, E. W. KLEINMAN and WM. L. LEONARD, as Receivers of IDAHO STATE BANK, E. B. JOHNSON, as Treasurer of Blaine County, Idaho, and SCHOOL DISTRICT No. 7, BLAINE COUNTY, IDAHO, Respondents

Supreme Court of Idaho

March 26, 1918

PUBLIC FUNDS-STATE DEPOSITORY LAW-DUTY OF COUNTY TREASURER-ATTEMPTED ILLEGAL WITHDRAWAL OF FUNDS-CLAIM FOR PREFERENCE.

1. It is the duty of the county treasurer, under the provisions of the state depository law, to deposit public funds in his control in banks which have qualified as depositories, and he is forbidden to withdraw sums so deposited except for the payment of warrants legally drawn, or for the purpose of depositing the same according to law in other banks likewise qualified, and the violation of these requirements is made a felony. (Sec. 2019, Rev. Codes.)

2. Where the proceeds of a school district bond sale were paid to the county treasurer and by him deposited in a bank which had complied with the provisions of the depository law, no part of the fund could thereafter be legally withdrawn and redeposited in the savings department of the same institution to the credit of the clerk of the school district, and regardless of the acts and intentions of the parties to such transaction the fund must be held to have remained in the custody of the county treasurer.

3. Money properly in the control of the county treasurer and deposited in a depository bank according to law must be held to be placed on general deposit in accordance with the provisions of the depository law, and no effect can be given to an unlawful attempt on the part of the county treasurer and county auditor to take such funds out of the protection of the depository law and place them on deposit in the same bank without the security of the depository's bond.

[As to rights, duties and liabilities of depositories of public funds, see note in Ann.Cas. 1916B, 1239]

APPEAL from the District Court of the Fourth Judicial District, for Blaine County. Hon. James R. Bothwell, Judge.

Action to have certain public funds decreed a trust fund and a preferred claim. Judgment for defendants affirmed.

Judgment affirmed. Costs awarded to respondents.

Wyman &amp Wyman, for Appellant.

It is conceded that the deposit of $ 10,000 by the school district was wholly illegal and contrary to law; that all parties to the transaction knew the facts, and particularly is it true that the bank received the money with full knowledge of the facts and circumstances. The money so deposited became a trust fund under the repeated decisions of this court under similar facts. (State v. Thum, 6 Idaho 323, 55 P 858; First Nat. Bank v. Bunting, 7 Idaho 27, 59 P 929, 1106; State v. Bruce, 17 Idaho 1, 134 Am. St. 245, 102 P. 831, L. R. A. 1916C, 1; Bellevue State Bank v. Coffin, 22 Idaho 210, 125 P. 816.)

These decisions hold that where public moneys are illegally deposited in a bank, the latter having knowledge of the facts in regard thereto, such deposit becomes a trust fund and the right of preferential payment attaches to it.

Sullivan & Sullivan, for Respondents.

We admit that the illegal deposit created a trust fund and that if the school district was going to lose the same, on account of said illegal deposit, that it would have a right to have said fund declared a preference. The school district, if it lost its money, is the only one entitled to claim that the public funds were illegally deposited and therefore a preference. But we deny that the county has any right to claim a preference in said fund by reason of later acts of negligence of its treasurer. Admitting a trust fund does not necessarily admit that the county is a preferred creditor. Even if one is a trust creditor it does not follow that he is entitled to a preference over a general creditor; they are on a par unless the trust creditor still shows other equities entitling him to a preference. (Cavin v. Gleason, 105 N.Y. 256, 11 N.E. 504; Officer v. Officer, 120 Iowa 389, 98 Am. St. 365, 369, 94 N.W. 947; Bradley v. Chesebrough, 111 Iowa 126, 82 N.W. 472.)

BUDGE, C. J. Morgan and Rice, JJ., concur.

OPINION

BUDGE, C. J.

This is an action brought by Blaine county against the receivers of the Idaho State Bank, E. B. Johnson, as county treasurer, and School District No. 7 of Blaine county, to have certain public funds which were deposited in the bank decreed a trust fund and a preferred claim. The facts appear in the amended complaint to which a demurrer interposed by the receivers and the school district was sustained. This is an appeal from the judgment of dismissal.

It is alleged in the amended complaint that the bank was conducting a general banking business at Hailey and was the official depository for Blaine county. Johnson was county treasurer from January, 1909, to January, 1915. On September 25, 1909, the school district received $ 20,356, as the proceeds of a bond sale to build a schoolhouse. This money was paid to Johnson as treasurer, by him credited upon his official books to the bond fund of the school district and deposited in the bank. About December 11, 1909, the school district caused an order for a warrant to be drawn on Johnson, as treasurer, payable to H. C. Beamer, as clerk of the district, out of said bond fund for $ 10,000. This order was countersigned by the county superintendent and presented to the auditor, who drew a warrant for the amount upon the treasurer, payable to Beamer, as clerk of the school district, out of the bond fund, and this warrant was presented to Johnson as treasurer, who thereupon executed and delivered to Beamer a check for the amount, payable to Beamer as clerk, out of the bond fund. Beamer deposited the same in the savings department of the bank in the name of "H. C. Beamer, clerk of School District No. 7," under an agreement with the bank that he might draw checks against the fund for the use and benefit of the district and that the sum so deposited should draw interest for the use and benefit of the district.

It is further alleged in the amended complaint: "That the said check was received by the said Idaho State Bank with full notice and knowledge that the same and the money represented by it belonged to said School District No. 7 and did not belong to said H. C. Beamer or to said H. C. Beamer as clerk of said school district, and that the same were received by said bank from and so deposited by said H. C Beamer as clerk of said school district and not otherwise; and said check and the money represented by it was received by the said bank with full knowledge that said check and the money represented by it was drawn, presented and deposited...