In Re: Rehear

CourtUnited States State Supreme Court of Idaho
Citation41 Idaho 454
PartiesOn Rehearing.
Decision Date18 August 1925

41 Idaho 454

On Rehearing.

Supreme Court of Idaho

August 18, 1925


DEPOSITARY LAW-DEPOSITARY ORDINANCE-AUTHORITY OF MUNICIPALITY - DEPOSITARY BOND - CONTRACT BETWEEN MUNICIPALITY AND SURETY ON DEPOSITARY BOND - CONSTRUCTION - AMENDMENT OF ORDINANCE UNDER WHICH BOND GIVEN-EFFECT OF AMENDMENT ON SURETY'S LIABILITY-MEASURE OF SURETY'S LIABILITY.

1. The enactment of a depositary law for the purpose of safeguarding municipal funds carries with it the consent of the legislature to the relation of creditor and debtor between the municipality and the depositary bank and at least authorizes a general deposit of such funds.

2. The enactment of a city ordinance on July 26, 1915, providing for the selection and designation of depositary banks and the giving of bonds therefor by such banks, as provided in Sess. Laws 1893, p. 97, sec. 65, was within the legislative power of the municipality.

3. The depositary statute of 1893 placed no limitation on the kind of deposit a municipality could make thereunder in [41 Idaho 455] depositary banks. Legislative authority to deposit municipal funds in such a depositary is authority to make a time deposit thereof.

4. Under the depositary statute a municipality is authorized to make the best bargain it can with a depositary bank in the way of interest on its idle funds, and has the power, consistent with its financial requirements, and under the protection of a proper bond, to consent to conditions of repayment such as would be implied from the placing of moneys on time deposit.

5. When a depositary bond is approved as provided by law and the funds of the municipality placed on deposit in the depositary bank, the sureties on the bond become obligated for the faithful and full performance by the bank of the contract between it and the municipality, the terms of which contract are to be found in the depositary ordinance and bond, and by the terms of those instruments, properly construed, are the sureties bound.

6. A contract of surety must receive a just and reasonable interpretation. The actual intent and meaning of the parties when the agreement was entered into, as deduced from the contract as a whole, from its subject matter, from the purpose of its execution and from the situation of the parties when they made it, must control its construction.

7. Held, that in the instant case an examination of the surety contract discloses that the city of Pocatello intended to make a general deposit in the depositary bank payable on demand and to obtain therefor a certain rate of interest on average daily balances, and that the sureties intended to assume an obligation for the payment of such general deposit on demand with the interest accruing.

8. Held, that the ordinance enacted by the City of Pocatello on Feb. 12, 1918, providing that the moneys of the city might be deposited on time deposit to bear interest at the rate of four per cent per annum, was a material amendment of the ordinance of July 26, 1915, and effected a material change in the contract between the city and the sureties on the theretofore existing depositary bond.

9. The surety contract, exactly as made, is the measure of the surety's liability. Any changes in the contract affecting the status of the surety, even though not injurious to him, have the effect of discharging him from liability. [41 Idaho 456]

10. Held, that in the instant case the time deposit of $32,000 waterworks fund money of the City of Pocatello with the Bannock National Bank is not within the undertaking of the sureties upon the bond in suit; that the bank never acquired title to said deposit, and that a right to the recovery thereof on behalf of the city does not exist as against appellant sureties.

APPEAL from the District Court of the Fifth Judicial District for Bannock County. Hon. B. S. Varian, Presiding Judge.

Action to recover on depositary bond which defendants had signed as sureties. Judgment for plaintiff affirmed on original hearing. Affirmed in part and reversed in part on rehearing.

B. W. Davis and Frank T. Wyman, for Respondents, file no brief on rehearing. T. C. Coffin, for Appellants, Lila Franklin, Executrix, and Clarence E. Franklin, Executor.

If the public officer did not have the authority and power in the first instance to do the act which he sought to do or to make the contract which he sought to make, then that act and that contract cannot be ratified, and the municipality or other political subdivision whom the officer sought to represent cannot be bound thereby. (22 R. C. L., p. 460, sec. 122.)

A general deposit creates the relationship of debtor and creditor. It is a relationship established by a civil, legal contract cognizable in a court of law and enforceable in a court of law. By the creation of such relationship the title to the money deposited passes from the depositor to the depositary. (State v. Thum, 6 Idaho 323, 328, 55 P. 858; National Bank of the Republic v. Millard, 10 Wall. (77 U. S.) 152, 19 L.Ed. 897, 899.)

A certificate of deposit is not a special deposit within the meaning of subd. 4 of C. S., sec. 8379. (1 Morse on Banks and Banking, 5th ed., secs. 297-309, pp. 562-581.) [41 Idaho 457]

A special deposit is "A deposit for safekeeping to be returned intact on demand, or for some specific purpose not contemplating a credit on general deposit." (3 R. C. L. 517; 1 Morse on Banks and Banking, 5th ed., sec. 183; 7 C. J. 630.)

A special deposit is in the nature of a bailment. The relationship of bailor and bailee is a purely legal relationship and a breach of the duties imposed by that relationship confers no jurisdiction whatever upon a court of equity. (Young v. Mercantile Trust Co., 140 F. 61; affirmed in 145 F. 39, 75 C. C. A. 264.)

An unauthorized or unlawful deposit of public funds in a bank does not create a special deposit. Such unauthorized, and therefore unlawful, action gives rise to a trust ex maleficio. The bank being charged with notice of the officer's authority receives the money not on contract but charged with a trust. (C. S., sec. 8379; Myers v. Board of Education, 51 Kan. 87, 37 Am. St. 263, 32 P. 658; State v. Midland State Bank, 52 Neb. 1, 66 Am. St. 484, 71 N.W. 1011; State v. Thum, 6 Idaho 323, 55 P. 858; Board v. Wilkinson, 119 Mich. 655, 78 N.W. 893, 44 L. R. A. 493; San Diego County v. California Nat. Bank, 52 F. 59; Independent School Dist. v. King, 80 Iowa, 497, 45 N.W. 908; Watts v. Cleveland, 21 Okl. 231, 95 P. 771, 16 L. R. A., N. S., 918; First National Bank v. Bunting & Co., 7 Idaho 27, 59 P. 929, 1106; Yellowstone County v. First Trust & Sav. Bank, 46 Mont. 439, 128 P. 596; Franklin Nat. Bank v. The City of Newark, 96 Ohio St. 453, 118 N.E. 117; Page County v. Rose, 130 Iowa, 296, 106 N.W. 744, 5 L. R. A., N. S., 886; Board of Commrs. v. Strawn, 157 F. 49, 84 C. C. A. 553, 15 L. R. A., N. S., 1100.) O. O. Haga and H. B. Thompson, for Appellants.

The defendants merely bound themselves to repay public funds deposited in a bank that was in no sense an official bank or an official depositary under the statutes [41 Idaho 458]

having certain public duties to perform by reason of the deposit. (Illinois Surety Co. v. United States, 226 F. 665, 141 C. C. A. 421.)

"It follows that the relation between the depositary and the county is that of debtor and creditor; that the depositary does not occupy the relation of a public officer having charge of public funds, which he may not use, and that the bond in suit is not, in a strict sense, an official bond." (Henry County v. Salmon, 201 Mo. 136, 163, 100 S.W. 20; Barrett v. Stoddard County, 246 Mo. 501, 511, 152 S.W. 43; Brown v. Wyandotte Co., 58 Kan. 672, 50 P. 888; Colquitt v. Simpson & Ledbetter, 72 Ga. 501.)

BUDGE, J.

-On January 23, 1925, a petition for rehearing was granted, and thereafter a reargument was had and the case again resubmitted. We have carefully re-examined the record and have reached the conclusion that the former opinion is correct in so far as it affects the liability of the appellant bondsmen for the moneys held by the Bannock National Bank on general deposit, viz.: the sum of $42,335.04. We will consider whether the obligation of the bond extends to a time deposit of $32,000 waterworks fund money made by the city treasurer March 26, 1919, evidenced by a time certificate of deposit issued by the bank on that date and renewed by succeeding city treasurers.

The depositary bond signed by the principal and sureties on July 7, 1915, contains the following conditions; "Now, therefore, if said Bannock National Bank shall at the beginning of each and every month (1) render to the city treasurer and city clerk a statement in duplicate showing the daily balance of the monies of the city of Pocatello held by it during the month next preceding and the interest thereof, and (2) shall well and truly keep all sums of money so deposited or to be deposited, as aforesaid, and the interest thereon subject at all times to the check and order of the city treasurer of said city of Pocatello, as aforesaid, and (3) shall pay over the [41 Idaho 459]

same and any part thereof, upon the check or written demand of said city treasurer, and to her successor in office as shall be by her demanded, and (4) shall calculate, credit and pay said interest, as aforesaid, and shall in all respects save and keep the city of Pocatello, Idaho, and the treasurer thereof harmless and indemnified for and by reason of making such deposit or deposits, then this obligation shall be void and of no effect, otherwise to remain in full force and virtue."

On July 26, 1915, an ordinance was passed by the city of Pocatello, designating certain banks then doing business in said city as depositaries for all funds of the city of Pocatello. The ordinance provides that there shall be charged to the said banks designated as depositaries interest at the rate of three per cent per annum, payable...

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