In re Insolvency of Fidelity State Bank of Orofino

• Decision Date: 03 August 1922
• Citation: In re Insolvency of Fidelity State Bank of Orofino, 209 P. 449, 35 Idaho 797 (Idaho 1922)
• Parties: In the Matter of the Insolvency of the FIDELITY STATE BANK OF OROFINO. FIDELITY STATE BANK, Appellant, v. NORTH FORK HIGHWAY DISTRICT, Respondent
• Court: Idaho Supreme Court

209 P. 449

35 Idaho 797

In the Matter of the Insolvency of the FIDELITY STATE BANK OF OROFINO. FIDELITY STATE BANK, Appellant, v. NORTH FORK HIGHWAY DISTRICT, Respondent

Supreme Court of Idaho

August 3, 1922

APPEAL from the District Court of the Second, Judicial District, for Clearwater County. Hon. Edgar C. Steele, Judge.

Action to recover public moneys deposited with appellant bank. Judgment for plaintiff. Affirmed.

Judgment of the trial court affirmed. Costs awarded to respondent. Petition for rehearing denied.

F. S Randall, for Appellant.

The police power has been expressly reserved in the Idaho constitution. (Art. 11, sec. 8; Sandpoint Water etc. Co v. City of Sandpoint, 31 Idaho 498, 173 P. 972.)

Under the police power the legislature was authorized to pass the statute complained of and held unconstitutional. (Noble State Bank v. Haskell, 219 U.S. 104, Ann. Cas. 1912A 487, 31 S.Ct. 186, 55 L.Ed. 112, 32 L. R. A., N. S., 1062; Assaria State Bank v. Dolley, 219 U.S. 121, 31 S.Ct. 189, 55 L.Ed. 123; State v. Woodmansee, 1 N.D. 246, 46 N.W. 970, 11 L. R. A. 420; Idaho Power & L. Co. v. Blomquist, 26 Idaho 222, Ann. Cas. 1916E, 282, 141 P. 1083; 28 Cyc. 131, notes 10-12; Idaho Const., sec. 3, art. 11; 12 C. J. 991, 1003, note 54, 1197.)

The petitioner by its acts has elected to abide by the law complained of. (Noble State Bank v. Haskell, supra; Assaria State Bank v. Dolley, supra; 7 C. J. 630, 631; Kaesemeyer v. Smith, 22 Idaho 1, 123 P. 943, 43 L. R. A., N. S., 100; Yellowstone County v. First Trust & Sav. Bank, 46 Mont. 439, 128 P. 596; State v. Thum, 6 Idaho 323, 55 P. 858.)

"Respondent could not be heard to question the right of the state to exercise its police power on the ground that by so doing the state would impair the obligation of contract." (Sandpoint Water & Light Co. v. City of Sandpoint, supra.)

The true exercise of police power is never embarrassed by the constitutional prohibitions against impairing the obligation of contracts and taking property without due process of law. (12 C. J. 991, 1197.)

In order for a contract to receive the benefit of the constitutional provision relative to the impairment of obligation, it must be valid in its inception. It can never have such benefit when it is the attempted contract between two wrongdoers. (12 C. J. 1052, 1053; State v. Griffin, 83 Conn. 1, 74 A. 1068; Noble v. Davidson, 177 Ind. 19, 96 N.E. 325.)

Nor does the constitutional provision extend to contractual relations which are not those of the parties themselves but which are imposed by law without the assent of the party bound. Such contracts are quasi contracts and therefore are not protected. (12 C. J. 1053, sec. 691; State of Louisiana v. City of New Orleans, 109 U.S. 285, 3 S.Ct. 211, 27 L.Ed. 936.)

Tannahill & Leeper, for Respondent.

A highway district is a municipal corporation. (Sec. 1505, C. S.; Shoshone Highway Dist. v. Anderson, 22 Idaho 109, 125 P. 219.)

The title to this money is vested in the highway district in trust for the uses and purposes for which it was raised. (Sec. 1512, C. S.)

As to vested rights in property and contract rights, the highway district is protected by the constitutions of the United States and of the state of Idaho. (12 C. J. 1008, par. 632; Grogan v. City of San Francisco, 18 Cal. 590; Board of Commrs. of Tippecanoe County v. Lucas, 3 Otto (U.S.), 108, 23 L.Ed. 822; Greene v. Niagara, 55 A.D. 475, 67 N.Y.S. 291; Board of Education v. Blodgett, 155 Ill. 441, 46 Am. St. 348, 40 N.E. 1025, 31 L. R. A. 70; Milam Co. v. Bateman, 54 Tex. 153, 166; Mt. Hope Cemetery v. Boston, 158 Mass. 509, 512, 35 Am. St. 515, 518, 33 N.E. 695; State v. Foley, 30 Minn. 350, 357, 15 N.W. 375; Wooster v. Plymouth, 62 N.H. 193, 210; Millburn v. Village of South Orange, 55 N.J.L. 254, 26 A. 75.)

This money was deposited by the highway district upon special deposit and was held in trust by the bank for the use and benefit of the highway district. (State v. Thum, 6 Ida, 323, 329, 55 P. 858; First Nat. Bank v. C. Bunting & Co., 7 Idaho 27, 59, P. 929, 1106; In re Bank of Nampa, 29 Idaho 166, 174, 157 P. 1117.)

The existing law enters into and becomes a part of all contracts. (Long v. Owen, 21 Idaho 243, Ann. Cas. 1913D, 465, 121 P. 99; 6 R. C. L. 855, par. 243; 13 C. J. 560, par. 523; Armour Packing Co. v. United States, 153 F. 1, 82 C. C. A. 135, 14 L. R. A., N. S., 400; Rees v. Watertown, 19 Wall. (U.S.) 107, 22 L.Ed. 72; Von Hoffman v. Quincy, 4 Wall. (U.S.) 535, 18 L.Ed. 403; Koshkonong v. Burton, 14 Otto (U.S.), 668, 26 L.Ed. 886; Fiske v. Jefferson Police Jury, 116 U.S. 131, 6 S.Ct. 329, 29 L.Ed. 587; United States v. Ansonia Brass etc. Co., 218 U.S. 452, 31 S.Ct. 49, 54 L.Ed. 1107; Seaboard Airline Ry. Co. v. Railroad Commission of Alabama, 155 F. 792; Bailey Ornamental Iron Works v. Goldschmidt, 33 Cal.App. 661, 166 P. 363; Western Lumber & Pole Co. v. City of Golden, 23 Colo. App. 461, 130 P. 1027; Lynch v. Baltimore & O. S.W. R. Co., 240 Ill. 567, 88 N.E. 1034; Metropolitan Life Ins. Co. v. Johnson, 49 Ind.App. 233, 94 N.E. 785; Graves v. Howard, 159 N.C. 594, Ann. Cas. 1914C, 565, 75 S.E. 998; Knight v. Clinkscales, 51 Okla. 508, 152 P. 133; McCaskill v. Union Naval Stores Co., 59 Fla. 571, 52 So. 961; Kessler v. Clayes, 147 Mo.App. 88, 125 S.W. 799; Watkins & Co. v. Kobiela, 84 Neb. 422, 121 N.W. 448; People v. Metropolitan Surety Co., 211 N.Y. 107, 105 N.E. 99; Id., 159 A.D. 929, 143 N.Y.S. 1136; Manvell v. Weaver, 53 Wash. 408, 102 P. 36; Pross v. Excelsior Cleaning & D. Co., 110 Misc. 195, 179 N.Y.S. 176; Lorando v. Gethro, 228 Mass. 181, 117 N.E. 185, 1 A. L. R. 1374.)

Rules of property as laid down by the highest courts of the state existing at the time a contract is made are an integral part of it. (13 C. J. 561, par. 523; Graves County Water Co. v. Ligon, 112 Ky. 775, 66 S.W. 725; Mercantile Trust etc Co. v. Columbus, 161 F. 135.)

The remedy is a part of the contract and cannot be impaired. ( Edwards v. Kearzey, 96 U.S. 595, 24 L.Ed. 793; Rees v. Watertown, supra; Wilder v. Campbell, 4 Idaho 695; 43 P. 677; Welsh v. Cross, 146 Cal. 621, 106 Am. St. 63, 2 Ann. Cas. 796, 81 P. 229.)

A special deposit is a bailment, title to which remains in the depositor and which is held in trust for him. (3 R. C. L. 517, par. 146; Bolles on Modern Law of Banking, p. 434, par. 436; Morse on Banks and Banking, p. 423, par. 190.)

The status of the deposit was fixed when made. (Harris v. Walker, 199 Ala. 51, 74 So. 40; Walker v. J. B. McCrary Co., 197 Ala. 638, 73 So. 342.)

This contract of special bailment cannot be impaired by a subsequent legislative act. (Sec. 10, art. 1, U. S. Const.; sec. 16, art. 1, Idaho Const.; Fletcher v. Peck, 6 Cranch (U.S.), 87, 3 L.Ed. 162; 6 R. C. L., par. 314; State v. Buttzville State Bank, 26 N.D. 196, 144 N.W. 105.)

Sec. 13, chap. 14, 1921 Sess. Laws, impairs the obligation of this contract. (12 C. J. 1056, par. 699, 1057, par. 702 and 703; 7 R. C. L. 324, par. 313.)

Jas. F. Ailshie, Amicus Curiae.

Prior to the last session of the legislature there was no lawful way for the funds of a highway district to reach the vaults of a bank under a general deposit. Any money the bank had on general deposit from the district was acquired in violation of law and both the officer of the district depositing it and the officer of the bank receiving it were guilty of a felony, and the title to the money could not pass under such circumstances. (In re Bank of Nampa, 29 Idaho 166, 157 P. 1117.)

BUDGE, J. McCarthy, Dunn and Lee, JJ., concur.

OPINION

BUDGE, J.

This action was brought by respondent, in accordance with the provisions of sec. 11, p. 60, chap. 42, Sess. Laws, 1921, to enforce a trust in the sum of $ 16,191.43 upon the general funds and estate of the Fidelity State Bank of Orofino.

The facts in this case are stipulated, as follows:

"1. That the petitioner herein, the North Fork Highway District is a highway district and a public corporation organized and existing under and by virtue of the provisions of chapter 66 of the Compiled Statutes of the state of Idaho.

"2. That one, M. LeBaron, was at all times in this petition and answer mentioned, the duly constituted, appointed, qualified and acting treasurer of the said North Fork Highway District. That as such treasurer all funds belonging to the said highway district during his incumbency have come into his possession and control.

"3. That prior to the 8th day of April, 1921, the Fidelity State Bank of Orofino was a banking corporation organized and existing under and by virtue of the laws of the state of Idaho, and engaged in the general banking business in said state, with its principal place of business at Orofino, Idaho.

"4. That on September 1st, 1920, there was on deposit in the Fidelity State Bank of Orofino, certain moneys which had been derived by the said highway district from the sale of highway bonds theretofore duly and legally issued and sold as provided by the provisions of chapter 66 of the Compiled Statutes of the state of Idaho, which said funds were obtained for the purpose of improving and building roads and highways within the North Fork Highway District. That the said funds were deposited by M. LeBaron as secretary-treasurer of the said North Fork Highway District and the said deposit was carried by the said bank under the following title: 'North Fork High. Dist. Imp. Fund, M. LeBaron, Sec'y-Treas., Cavendish, Idaho.' That on September 1st, 1920, the said deposit amounted to the sum of $ 17,383.65. That thereafter on or about the 8th day of September, 1920, there was withdrawn from the said North Fork Highway District improvement fund deposit the sum of $ 10,000.00, which said sum was deposited in the same bank upon time certificates of deposit; . . . . ...