City of Livingston v. Woods

• Decision Date: 30 June 1897
• Citation: 49 P. 437,20 Mont. 91
• Parties: CITY OF LIVINGSTON v. WOODS et al.
• Court: Montana Supreme Court

49 P. 437

20 Mont. 91

CITY OF LIVINGSTON v. WOODS et al.

Supreme Court of Montana

June 30, 1897

Appeal from district court, Park county; Frank Henry, Judge.

Action by the city of Livingston against Frank T. Woods and others to recover upon an official bond. From a judgment for plaintiff, defendants appeal. Reversed.

The defendant Frank T. Woods, at the time this action was commenced, and prior thereto, was the treasurer of the city of Livingston. The other defendants were sureties on his official bond. This action is on the official bond of Woods to collect the sum of $756.50, which it is alleged in the complaint he failed, in violation of the terms and conditions of his bond, to pay over to his successor in office. The bond contains the following conditions: "Now, therefore, if the said Frank T. Woods shall well, truly, and faithfully perform all official duties now required of him by law, and shall truly and faithfully execute and perform all the duties of such office of city treasurer required by any law to be enacted subsequently to the execution of this bond, then this obligation to be void and of no effect; otherwise, to remain in full force and virtue." The answer denies that the defendant Woods did not well, truly, and faithfully perform the duties of his office required of him by the laws in force at the time of his election, or those enacted subsequent to the execution of said bond. The defendants then allege that on the 1st day of May, 1893, when defendant Woods entered up on the duties of his office of city treasurer of the city of Livingston, the moneys belonging to the city of Livingston in the hands of his predecessor, were on deposit in the Livingston National Bank, a bank doing business in the city of Livingston; that said bank had been used for more than a year prior thereto as the depository for the moneys in the hands of the city treasurer; that, upon his assuming the duties of the office of city treasurer, the said Woods continued to keep the moneys on deposit in said bank; that he was required by an ordinance of the city to deposit said moneys. Said ordinance reads as follows: "The city treasurer, acting as city collector, shall receive all moneys belonging to the city, and shall deposit all moneys in his own name as treasurer." The said ordinance further required the city treasurer to keep a correct account of all moneys belonging to the city, and that his books should be kept in such a manner as to correctly present the condition of the city finances, and be at all times subject to the inspection or examination of the mayor and council, or any member thereof. The defendants further allege that subsequent to assuming the duties of said office, he, as city treasurer, filed with the city council of the city of Livingston his report, showing the amount of money which was deposited in the Livingston National Bank, which report was approved by the board of aldermen of the city for the months of June and July, 1893, and that at all times prior to the 7th day of July, 1893, the Livingston National Bank was considered by the business men and the people of the city of Livingston and vicinity thereof to be a responsible and solvent banking institution, and that he (the said Frank T Woods) used all the precaution that was necessary or required of him by law in the selection of the Livingston National Bank as a depository for the city money; that on the 7th day of July, 1893, the said Livingston National Bank suspended operations, and became insolvent, and on the 20th day of July, 1893, passed into the hands of a receiver, and has ever since been in the hands of a receiver, in process of settlement; that, on the day the bank suspended, he had on deposit in said bank, in his name, as treasurer of the city the sum of $1,513; that thereafter he (the said Woods), as city treasurer, filed his claim with the receiver of said bank for the moneys on deposit in his name, as city treasurer, prior to the suspension thereof, which was duly allowed by the receiver of said bank; that since the allowance of said claim the receiver has paid to him, as city treasurer, the sum of $756.50, leaving a balance due him, as said city treasurer, the sum of $756.50, the amount sued for; and that there are not sufficient assets in the hands of the receiver to pay such balance. Defendants further alleged that the sum received by Woods, as city treasurer, had been paid over to his successor, and that he has assigned the claim against said bank for the balance due to his successor in office. The answer then alleges that the city of Livingston had not prior to said 7th day of July, 1893, selected any depository of the said moneys of the city, except as hereinbefore set forth; that said loss of the funds of the city was occasioned without any fault, negligence, or fraud on the part of said defendant Woods; and that he faithfully discharged the duties of his office, as required of him by law; and that, by reason of the facts hereinbefore mentioned, the said plaintiff is, and ought to be, estopped from claiming that said defendant Woods did not use ordinary care and diligence in the selection of the Livingston National Bank as said depository. The plaintiff filed a general demurrer to the answer, which was sustained by the court. Defendants electing to stand upon their answer, a judgment was rendered for plaintiff for the amount sued for. The defendants appeal from the judgment.

Where a city treasurer, pursuant to Comp.St.1887, § 351, requiring him to deposit the funds of the city, exercised prudence in the selection of a bank of good standing wherein to deposit the funds, and was free from negligence in permitting them to remain there, he was not liable for loss of the funds by the failure of the bank.

Campbell & Stork and A. J. Shores, for appellants.

Smith & Wilson, for appellee.

PEMBERTON C.J. (after stating the facts).

Sections 350, 351, and 352 of the Compiled Statutes of 1887 control as to the conditions of the city treasurer's bond, as well as define and limit his duties and powers in relation to the public funds. Section 350 provides: "The treasurer shall give bond to the city in its incorporate name, with sureties to be approved by council, *** for the faithful performance of his duties as treasurer, and also when he vacates the office that he will deliver over to his successor all money, books, papers, property and all other things belonging to the city or town held by him as treasurer." Section 351 provides: "The city treasurer shall also be city collector. He shall receive all money belonging to the corporation, and shall deposit all money in his name as treasurer." Section 352 provides: "The treasurer is hereby expressly prohibited from using directly or indirectly the moneys or property of the corporation for his own private gain or profit, or that of any other person or persons." The contention of the appellants is "that, when the city treasurer deposited the money of the city in the bank in his name as city treasurer, he performed the duties of his office as directed by law, and fully complied with the conditions of his bond, and if he used ordinary care in selecting the bank in which to deposit the money, and the bank afterwards failed, the loss, if any, must be borne by the city."

The question here presented of the liability of an officer on his official bond for the loss of public moneys, and what, if any, facts will excuse the loss, is a grave and far-reaching one. We are not only mindful of the importance of this question, but we are confronted with the great difference and conflict of views and decisions upon the subject among the best authorities and highest courts in the land. Mechem, in his work on Public Officers, says that four theories, at least, of this question, have prevailed, and these four theories are given in sections 298, 299, 300, and 301 of his work. These sections read as follows: Section 298: "One view is based upon the strict language of the bond. The officer having bound himself and his sureties, without reservation or qualification, by the express terms of his bond, that he will duly deliver and pay over the public funds which come into his hands, this obligation 'can only be met or discharged by making such delivery or payment,' and that, having bound himself by this solemn agreement to do this act, he must be 'held liable for his nonperformance, though it is rendered impossible by events over which he had no control.' If the parties had desired exemption in a given contingency, it should have been 'so nominated in the bond."' Section 299: "A second view, somewhat analogous to the last, is based upon the requirements of the public policy. 'Public policy,' says McLean, J., 'requires that every depositary of the public money should be held to a strict accountability. Not only that he should exercise the highest degree of vigilance, but that he should keep safely the moneys which come to his hands. Any relaxation of this condition would open a door to frauds, which might be practiced with impunity. A depositary would have nothing more to do than to lay his plans and arrange his proofs, so as to establish his loss without laches on his part. Let such a principle be applied to our postmasters, collectors of the customs, receivers of public moneys, and others who receive more or less of the public funds, and what losses might not be anticipated by the public? No such principle has been recognized or admitted as a legal defense. And it is believed the instances are few, if, indeed, any can be found, where any relief has been given in such cases by the interposition of congress. As every depositary receives the office with a full knowledge of its responsibilities, he cannot in case of loss complain of...