Edwards v. Logan County

Decision Date01 March 1932
PartiesEDWARDS et al. v. LOGAN COUNTY.
CourtKentucky Court of Appeals

As Modified on Denial of Rehearing June 14, 1932.

Appeal from Circuit Court, Logan County.

Action by Logan County against J. H. Edwards and another. From judgment for plaintiff, defendants appeal.

Reversed and remanded.

Wm Marshall Bullitt, Leo Wolford, and Bruce & Bullitt, all of Louisville, and E. J. Felts, of Russellville, and L. S Blickenstaff, of Louisville, for appellants.

Coleman Taylor, of Russellville, and S. Y. Trimble, of Hopkinsville for appellee.

STANLEY C.

The case involves the liability of the appellants, J. H. Edwards and the Fidelity & Deposit Company of Maryland, surety on his bond as treasurer of Logan county, for loss of county funds sustained by the closing of the Bank of Russellville in June, 1930. The amount on deposit was $61,489.98, for which sum judgment was rendered against the principal and $40,000 against the surety; that being the amount of its suretyship. The judgments, however, were to be credited by any sums collected in the liquidation of the bank.

The suit is planted upon pleas of absolute liability as well as upon negligence on the part of the treasurer in having failed to protect the county by withdrawing the funds because of insolvency, anticipated or actual. The defense consisted of a traverse and affirmative pleas resting in part upon the ground that the fiscal court of Logan county had designated the Bank of Russellville as a depository of county funds and thereby relieved the treasurer of the responsibility for loss sustained through its insolvency. The trial court was of the opinion that the treasurer and his surety were liable in all events and that the designation of the bank as a depository was ineffectual because ultra vires.

There are two schools of thought, as expressed in the opinions, concerning the liability of a fiscal public officer. One line of cases holds the officer to be a debtor or guarantor, with absolute liability, regardless of the cause of the loss. The other line holds him to be a special bailee or trustee with a more rigorous responsibility than an ordinary bailee, but with his liability limited to loss through negligence, misjudgment, imprudence, or wrongdoing. 22 R. C. 468; Breckenridge County v. Gannaway, 243 Ky. 49, 47 S.W.2d 934. The parties to this appeal have argued the merits of the divergent doctrines, and each maintains that the few analogous cases which have come before this court aligns us with the respective adjudications. The facts of this case do not seem to require the determination of that issue under the conclusions we have reached.

When Edwards became treasurer on January 28, 1930, there was transferred to him by his predecessor $89,460.68, then on deposit in the Bank of Russellville, which four years before had been designated as a depository of the county. On that day, by order of the fiscal court, the Bank of Russellville and the Southern Deposit Bank of Russellville were "designated as depositories of the county funds of Logan County, by J. H. Edwards, treasurer of Logan County."

In determining the validity and effect of this order, we find sufficient authority in our own statutes and decisions. The opinions of other courts are generally rested upon different statutes and are not altogether apposite. It is argued in behalf of the appellee that the action of the fiscal court is legislative in character and that power to legislate is not within the powers or authority expressly granted fiscal courts by the General Assembly. It seems clear to us that the action is to be regarded merely as providing a means of holding and controlling the funds of the county and within the authority vested in the fiscal court.

A county is a subordinate political subdivision of the state and a part of the sovereignty itself, existing and operating under the general laws of the commonwealth, and deriving all its powers of functioning through express legislative enactments, as contradistinguished from a city, with a charter. Downing v. Mason County, 87 Ky. 208, 8 S.W. 264, 10 Ky. Law Rep. 105, 12 Am.St.Rep. 473; Forsythe v. Pendleton County, 205 Ky. 770, 266 S.W. 639. The fiscal court of the county is created by section 144 of the Constitution and is established, empowered, and controlled by chapter 52 (section 1833 et seq.) of the Statutes. Gross v. Fiscal Court of Jefferson County, 225 Ky. 641, 9 S.W.2d 1006. The management of the business and financial affairs of the county is lodged in that body, and its duties and powers have been granted and defined in several statutes. Section 1840 enumerates a number of express powers, including the grant of jurisdiction "to regulate and control the fiscal affairs and property of the county." Explicit powers necessarily include implicit powers reasonably incidental and indispensable to their proper exercise and to accomplish the purpose of the creation and existence of the body to whom granted and the object to be attained or achieved. Estill County v. Wallace, 219 Ky. 174, 292 S.W. 816; Bell County Board of Education v. Lee, 239 Ky. 317, 39 S.W.2d 492. The consequential powers of the fiscal court have been recognized along many lines of activity in numerous decisions of this court. It is said in Pulaski County v. Richardson, 225 Ky. 556, 9 S.W.2d 523, the fiscal court has been by statute given almost unlimited control of the fiscal affairs of a county. Few, if any, of the acts reviewed by this court are closer to being within the express terms of the authority of that agency than the one under consideration; especially when the statutes relating to the county treasurer are read with chapter 52 of the Statutes.

Those statutes are section 928 et seq. Section 938 vests in the fiscal court the discretionary power to appoint a county treasurer. Barnett v. Gilbert, 164 Ky. 564, 175 S.W. 1029. If it does not choose to do so, we do not suppose any one would doubt the power of the court to have the funds of the county deposited in a bank. That power is not abrogated or denied when it elects to exercise the discretion given it and appoints a treasurer through whom it will handle the funds. On the contrary, it is expressly provided in section 931 that money received by the treasurer shall "be held subject to the order of the fiscal court of the county." The order of the fiscal court under consideration could have no other effect than to direct that the funds of the county held by J. H. Edwards, treasurer, be deposited in the designated banks.

The opinion of Stephens v. City of Ludlow, 159 Ky. 729 169 S.W. 473, 474, is decisive. The city treasurer denied the power of the city to choose a depository and require him to keep the funds in his custody in it. His arguments were that, as he was responsible under his bond for the security of the funds, he had the right to select his depository, and that the council had no power to interfere with or control his actions or to direct in what bank the funds should be placed in the absence of express legislative authority. Section 3555 of the Statutes, a part of the charter of that city, contains the following: "It shall be the duty of the treasurer to receive and safely keep all money belonging to the city, and to pay the same as directed by order of the board of council." It is further provided that he shall "perform such other duties as may be required of him by ordinance not inconsistent with this act." It is to be observed that there is lacking from this the provision as to the county treasurer holding the funds under order of the fiscal court. Noting that the statute does not in terms grant either...

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