Hurlburt v. Kephart

• Decision Date: 03 April 1911
• Citation: 115 P. 521,50 Colo. 353
• Parties: HURLBURT, et al. v KEPHART
• Court: Colorado Supreme Court

115 P. 521

50 Colo. 353

HURLBURT, et al. v KEPHART

Supreme Court of Colorado

April 3, 1911

Appeal from District Court, Montrose County; Sprigg Shackleford Judge.

Action by George W. Kephart against George R. Hurlburt and others. Judgement for plaintiff, and defendants appeal. Affirmed.

Story & Story, for appellants.

Charles J. Hughes, Jr., and Bell, Catlin & Blake (P.W. Mothersill, of counsel), for appellee.

HILL J.

This action was brought by the appellee, a former State Treasurer to recover judgment against the appellants and others as sureties on a bond alleged to have been given to secure deposits of state funds made by Kephart as State Treasurer in the Bank of Montrose. A demurrer was sustained to the original complaint; the appellee declined to amend; judgment was entered against him, which was reversed by our Court of Appeals. Kephart v. Buddecke, 20 Colo.App. 546, 80 P. 501. That court held that the sureties on the bond were liable for the safe-keeping and payment of the money deposited prior to the execution of the bond, as well as afterwards, and that the promise in the bond of the Treasurer to make future deposits in the bank was sufficient consideration to the bank and its sureties to make them liable for all money already on deposit with the bank and to be deposited in the future. After the reversal of the judgment, the appellants filed an answer in which, first, they denied certain allegations of the complaint, and for a further defense they pleaded a failure of consideration. To this defense a replication was filed, denying its allegations. The replication also set forth facts attempting to establish several considerations for the execution of the bond. A demurrer to the replication of the further defense was overruled. Trial was to the court, which resulted in separate judgments against each of the appellants for their proportionate share of the amount of the loss, caused by the failure of the bank, based upon the number of signers to the bond. From this judgment, this appeal was prosecuted by some of the defendants.

At the trial it was shown that one signer of the bond had gone through bankruptcy proceedings; while others had made satisfactory arrangements for their proportionate shares of the loss. The court rendered separate judgments against the defendants contesting this claim, limiting them to the proportionate amounts that would have been owing by each had all paid their respective shares, and we do not understand that any serious contention is made concerning the form or amount of the judgment.

Eliminating the outside picket line contentions, the material facts as disclosed by the record are: That Mr. Kephart was the State Treasurer during the years 1897 and 1898; that when he was inducted into office (January 12, 1897) Mr. Mulnix, his predecessor, tendered to him, as part of the state funds, certificates of deposit in this bank to the amount of $15,000; that a Mr. McClure, who was solicitous of having this money retained upon deposit in this bank, was in Denver for that purpose; that he (McClure) had absolute control of the bank's policy and conduct, it being (as testified by its cashier) a one man's bank; that some time between the 12th and 16th of January an agreement was entered into with Mr. Kephart, whereby, in consideration that this money was allowed to remain in this bank or to be so redeposited in the name of Kephart, the bank would cause to be executed and delivered to the Treasurer a good and sufficient bond to secure its safe-keeping, return, etc.; that under this agreement a bond was prepared by the Treasurer and delivered to Mr. McClure, who took the same to Montrose, together with the old certificates of deposit (which had been indorsed to Kephart), with instructions that upon the execution of the new bond to have it returned, together with new certificates, made in the name of Kephart, for the amount of the old ones; that in compliance with this understanding Mr. McClure returned to Montrose, arriving there upon Saturday, the 16th, at which time he instructed the cashier to have executed new certificates in the name of Kephart and to date them back as of date January 12th, the date Mr. Kephart was inducted into office (which was done, evidently for the purpose of having interest commence thereon as of that date.

The bond was not executed or at least not dated, until Monday, the 18th; all were then returned to Denver together. The certificates were accepted by Kephart in lieu of the old ones, and the bond was accepted as security for these deposits. All of this money remained on deposit thereafter. September 28, 1897, the bank became insolvent, closed its doors, refused to pay depositors, and immediately made a general assignment for the benefit of its creditors, and passed into the hands of an assignee, and forever failed and refused to pay the amount of said deposit and interest, except a small portion which was paid by the assignee, being the Treasurer's proportional share made out of its assets.

The bond reads as follows: "Know all men by these presents that we, Bank of Montrose, as principals, and J.E. McClure, F.H. Reinhold, Fred G. Farner, N.G. Clark, R.C. Diehl, J.M. Cunningham, J.W. Owens, A.E. Buddecke, James A. Fenlon, W.T. Ryman and George R. Hurlburt, as sureties, are held and firmly bound unto Geo.W. Kephart, Treasurer of the state of Colorado, in the just and full sum of thirty thousand/00 dollars, for the payment of which well and truly to be made, we hereby bind ourselves, our heirs, executors and administrators, jointly and severally, firmly and by these presents. Sealed with our seals and dated the 18th day of January, A.D.1987. The condition of this obligation is such that: Whereas, there is no depository provided by the state for the use of the Treasurer, who is nevertheless absolutely responsible for the safe-keeping of its funds; and whereas, it has been heretofore customary and expedient to deposit the monies of the state in the name of the Treasurer in divers banks and banking institutions of the state of Colorado, to be by them held subject to the order and demand of the Treasurer, as the public welfare and requirements demand; and whereas,large sums of money have accumulated in the state treasury which have been so deposited and which may continue to so accumulate beyond the demands to be made thereon during the term of office of the said George W. Kephart, from which the people of the state are deriving no revenue or benefit and which, for safe-keeping should be deposited in the name of the Treasurer in divers banks aforesaid; whereas, the said George W. Kephart, Treasurer as aforesaid, has determined and will deposit certain of the monies of the state of Colorado, for safe-keeping, with and in the Bank of Montrose, or Montrose. The amount thereof shall be subject to withdrawal or diminution by the said George W. Kephart, as the requirements of his office shall demand and which amount may be increased or decreased as the said George W. Kephart may determine; and whereas, the said bank, in consideration of the said deposits, has agreed to and will pay the said George W. Kephart, for the use and benefit of the state of Colorado, the sum of four per cent. per annum on account of said deposit, the same to be quarterly upon the daily average of the sum of such amount as the said bank shall have on deposit to the credit of said George W. Kephart, for the quarter or any fraction...