Buhl Highway Dist. v. Allred

• Citation: 41 Idaho 54,238 P. 298
• Court: United States State Supreme Court of Idaho
• Decision Date: 29 June 1925
• Parties: BUHL HIGHWAY DISTRICT, a Municipal Corporation, Respondent, v. RUSS W. ALLRED and UNITED STATES FIDELITY & GUARANTY COMPANY, a Corporation, Appellants

238 P. 298

41 Idaho 54

BUHL HIGHWAY DISTRICT, a Municipal Corporation, Respondent, v. RUSS W. ALLRED and UNITED STATES FIDELITY & GUARANTY COMPANY, a Corporation, Appellants

Supreme Court of Idaho

June 29, 1925

MUNICIPAL CORPORATIONS - PUBLIC DEPOSITORY LAW - DEPOSITORIES - FAILURE TO PAY DEPOSITS-INSOLVENCY - "LOSS" OF FUNDS - HIGHWAY DISTRICT-FUNDS RECEIVED BY TREASURER-FAILURE TO CALL WARRANTS - EFFECT - LIABILITY OF TREASURER - COMMISSIONERS HAVE NO POWER TO WAIVE COMPLIANCE WITH LAW - FAILURE TO APPORTION FUNDS-EFFECT-DEPOSITORY BONDS-DEPOSIT WITH COUNTY AUDITOR-MITIGATION OF DAMAGES-FAILURE OF DEPOSITORY TO CREDIT INTEREST ON DAILY BALANCES-EFFECT.

1. When a bank, a depository, fails to pay back deposits by reason of its insolvency, the money is "lost" in contemplation of the public depository law (Sess. Laws 1921, c. 256, sec. 33), even though a portion or all of the deposit may be ultimately recovered from the bank or stockholders or upon a depository bond.

2. The evidence held sufficient to show that the funds in dispute were received by the treasurer of the depositing unit.

3. A treasurer of a highway district, who fails, neglects and refuses to call warrants of the district for payment whenever there is an amount to the credit of the district fund, as shown by the books of the treasurer, sufficient to pay the warrant or warrants next entitled to payment therefrom, but leaves the money on deposit in a depository bank which thereafter fails, contributes to the loss of those funds, and is liable personally and upon his official bond for such loss.

4. The commissioners of a highway district have no power or authority to waive the performance of the duties of its treasurer to call outstanding warrants for payment when there is an amount to the credit of the district fund sufficient to pay such warrants, or to apportion the funds of the district between duly designated depositories, so as to excuse a breach of duty of the treasurer in failing to perform such duties, or relieve him from liability for the loss of funds through such breach of trust.

5. A treasurer of a depositing unit, who fails and neglects to keep deposited with each designated depository, as nearly as practicable, such proportion of the total deposit of the depositing unit as the capital and surplus of such bank bears to the total capital and surplus of all designated depositories contributes to the loss of such funds by the failure of a depository bank in which he has deposits in excess of the amount which should have been apportioned thereto.

6. Under the public depository law (Sess. Laws 1921, c. 256 sec. 18), the deposit of depository bonds with the county auditor is not a condition precedent to their becoming effective.

7. A depositing unit need not seek recovery upon a depository bond, or recovery of supposed trust funds, or offset its warrants held by the depository against a lost deposit before bringing action against its treasurer upon his official bond for contributing to the loss of such funds.

8. The rule that one must mitigate or make his damages as little as possible applies to the time when damages are accruing, not to his election of remedies after damages have accrued.

9. The failure of a depository to credit interest upon daily balances to the account of the depositing unit does not render the treasurer of the depositing unit liable for such interest.

10. The failure of a treasurer of a highway district to call outstanding warrants for payment when they should have been called renders him liable for interest accrued and unpaid since a date ten days after the warrants should have been called.

APPEAL from the District Court of the Eleventh Judicial District for Twin Falls County. Hon. William A. Babcock, Judge.

Action on the bond of the treasurer of a highway district to recover funds lost through the insolvency of a depository bank. Judgment for plaintiff. Modified and affirmed.

Judgment affirmed. No costs awarded on this appeal.

Gustin & Pence and A. R. Hicks, for Appellants.

Payment of the warrants by Buhl banks, having deposits of plaintiff relieves plaintiff from further liability. (1 Morse on Banks and Banking, 5th ed., sec. 311; 2 Daniel on Negotiable Instruments, 6th ed., sec. 1572; Bates v. Capital State Bank, 18 Idaho 429, 110 P. 277; Mt. Sterling Nat. Bk. v. Green, 99 Ky. 262, 35 S.W. 911, 32 L. R. A. 568; Ames' Cases on Suretyship, p. 220, note; Bank of Taylorsville v. Hardesty (Ky.), 91 S.W. 729; Fidelity Ins. Trust & S.D. Co. v. West Penn & S. C. R. Co., 138 Pa. 494, 21 Am. St. 911, 21 A. 21; McConnel v. Simpson, 36 F. 750; Montgomery v. Victory, 110 Ind. 211, 11 N.E. 38; People v. Craig, 63 Ohio 374, 81 Am. St. 639, 59 N.E. 102, 52 L. R. A. 872; Lane v. Hunt, 13 Tex. Civ. 315, 35 S.W. 10; Hamilton v. Dooly, 15 Utah 280, 49 P. 769; Gray v. Herman, 75 Wis. 453, 44 N.W. 248, 6 L. R. A. 691; Allen v. McCreary, 101 Ala. 514, 14 So. 320; Dial v. Inland, 52 Wash. 81, 100 P. 157; First Nat. Bank v. Terry, 203 Ala. 401, 83 So. 170.)

These warrants are not negotiable under the law-merchant and the assignee stands in the same position as the assignor. (Goldman v. Murray, 164 Cal. 419, 129 P. 462; Craig v. Palo Alto Stock Farm, 16 Idaho 701, 102 P. 393; Warren v. Stoddart, 6 Idaho 692, 59 P. 540; Machen v. R. Co. (Mo. App.), 242 S.W. 131; Sanderson v. Clark, 33 Idaho 359, 194 P. 472; Le Porin v. State Exchange Bank, 113 Kan. 76, 213 P. 650; Sagory v. Metropolitan Bank, 42 La. 627, 7 So. 633; Garfield v. Crocker, 63 Kan. 272, 65 P. 273; 5 C. J. 966; Wall v. Monroe, 103 U.S. 74, 26 L.Ed. 430; Bank of Santa Cruz v. Bartlett, 78 Cal. 301, 20 P. 682; American Bank v. Sommerville, 191 Cal. 364, 216 P. 376; Barker v. Seattle, 97 Wash. 511, 166 P. 1143; Lane v. Hunt, supra; Daniel on Negotiable Instruments, sec. 427.)

Loss must be actually sustained before recovery. (9 C. J. 129; Dart v. Southwestern Bldg. & L. Assn., 99 Ga. 794, 27 S.E. 171; Stewart v. Abbey, 62 Misc. 84, 116 N.Y.S. 259; Scott v. Phillips, 140 Pa. 51, 21 A. 241; City of Aberdeen v. Honey, 8 Wash. 251, 35 P. 1097; City v. Brett, 193 N.Y. 276, 86 N.E. 6; Massey v. Schott, 16 F. Cas. 1073, 1 Pet. C. C. 132, 262; Elliott on Contracts, sec. 2120; Sedgwick on Damages, 9th ed., secs. 96, 675; Sutherland on Damages, 3d ed., sec. 75; Williston on Contracts, sec. 774; Turck v. Marshall Silver Min. Co., 8 Colo. 113, 5 P. 838; Keck v. Bieber, 148 Pa. 645, 33 Am. St. 846, 24 A. 170.)

Plaintiff has not been called upon to pay warrants and the action is premature. (1 C. J. 1151; Rockford v. Jacob, 6 Wash. 421, 33 P. 1057.)

It is the duty of the district to take such measures as it can to reduce any possible loss. (Page on Contracts, sec. 3193; Williston on Contracts, sec. 1353; Sedgwick on Damages, secs. 200, 202; Davis v. Fish, 1 G. Greene (Iowa), 406, 48 Am. Dec. 387; Miller v. Mariner, 9 Greenl. (Me.) 51, 20 Am. Dec. 341; State v. McNelis, 72 Ind.App. 231, 122 N.E. 690; United States v. United States F. & G. Co., 236 U.S. 526, 35 S.Ct. 298, 59 L.Ed. 696.)

Bank can avail itself of any offsets it may have. This is under the doctrine that it must mitigate any loss; it is under obligation to take that course. (7 C. J. 652; Hall v. McIntosh, 22 Colo. App. 380, 124 P. 753; Williams v. Johnson, 50 Mont. 7, 144 P. 768; Hall v. Burrell, 22 Colo. App. 278, 124 P. 751.)

Bothwell & Chapman, for Respondent.

The finding of the court that Allred, as treasurer of respondent, in violation of his duties as such treasurer and in violation of law, failed, refused and neglected to pay outstanding registered warrants of respondent against its general road and bridge fund in the sum of $ 41,825.16, and that he unlawfully and fraudulently violated his duties in appropriating said sum of money to his own use, is sustained by the evidence and supported by the law. It was Allred's duty, as respondent's treasurer, to call for payment and to pay respondent's outstanding registered warrants in an amount equal to its funds in his possession for that purpose. For the breach of this duty his official bond is liable in the amount of the loss occasioned thereby. (C. S., secs. 1504, 1544, 1545, 1546, 1547, 1548, 1549, 1555; sec. 10, art. 7, and sec. 4, art. 8, Const. Ida.; 29 Cyc. 1386, 1455; 22 R. C. L., secs. 176, 189, 191; State v. Title Guaranty & Surety Co., 27 Idaho 752, 152 P. 189; Bush v. Johnson County, 48 Neb. 1, 58 Am. St. 673; State v. Nevin, 19 Nev. 162, 3 Am. St. 873; State v. Copeland, 96 Tenn. 296, 54 Am. St. 840; Lee v. Charmley, 20 N.D. 570, 129 N.W. 448, 33 L. R. A., N. S., 275; Gold v. Campbell, 54 Tex. Civ. 269, 117 S.W. 463; Richland County v. Owens, 92 S.C. 329, 75 S.E. 549; Myers v. Colquitt (Tex.), 173 S.W. 993; Deason v. Gray, 189 Ala. 672, 66 So. 646; American Surety Co. v. Stinnett, 78 Okla. 31, 188 P. 1060; Mower County v. American Bonding Co., 133 Minn. 274, 158 N.W. 394; People v. Smith, 123 Cal. 70, 55 P. 765; Graham v. City of Baxley, 117 Ga. 42, 43 S.E. 405; Ramsay's Estate v. People, 197 Ill. 572, 90 Am. St. 177, 64 N.E. 549; Hall v. Tierney, 89 Minn. 407, 95 N.W. 219; National Bank of Redemption v. Rutledge, 84 F. 400; State v. Moore, 56 Neb. 82, 76 N.W. 474; Fidelity & Deposit Co. of Maryland v. Wilkinson County, 106 Miss. 654, Ann. Cas. 1916B, 1248, 64 So. 457.)

The mere presentation of warrants to Allred, as treasurer for registration, and the fact of the purchase of some of them by the Citizens State Bank of Buhl from the original payees, was neither in fact nor in law a payment of such warrants by the Citizens State Bank of Buhl nor by respondent. So far as this action is concerned, the question of whether these warrants are negotiable or non-negotiable is unimportant, since there is an entire absence of any question regarding the validity or...