National Surety Co. v. State

• Citation: 123 So. 202,219 Ala. 609
• Decision Date: 20 June 1929
• Docket Number: 3 Div. 827.
• Parties: NATIONAL SURETY CO. v. STATE ET AL.
• Court: Supreme Court of Alabama

123 So. 202

219 Ala. 609

NATIONAL SURETY CO. v. STATE ET AL.

3 Div. 827.

Supreme Court of Alabama

June 20, 1929

Appeal from Circuit Court, Montgomery County; Leon McCord, Judge.

Bill in equity by the State of Alabama against J. A. Eason, the Maryland Casualty Company, and the National Surety Company with cross-bills by respondents. From a decree denying relief under the cross-bills, and awarding relief to complainant as against respondent National Surety Company, said respondent appeals. Corrected and affirmed.

C. O Stokes, of Ozark, and Ball & Ball, of Montgomery, for appellant.

Charlie C. McCall, Atty. Gen., Thos. E. Knight, Jr., Asst. Atty Gen., Stokely, Scrivner, Dominick & Smith, of Birmingham, and Sollie & Sollie, of Ozark, for the State.

THOMAS J.

The suit by the state, in equity, was for the recovery for devastavit of public funds or moneys wrongfully deposited in the bank and without surety, whereby the same was lost.

Such a bill is not required to allege special grounds for "equitable interference." The statute prescribes the right. Sections 5648, 5649, Code of 1928; Bradford v. State, 201 Ala. 170, 77 So. 696; Id., 204 Ala. 46, 85 So. 435.

The making parties respondents the principal on the several official bonds, and respective sureties, did not render the bill multifarious (section 5649) and affect the right of its maintenance in equity (Bradford v. State, 204 Ala. 46, 85 So. 435, State v. Clements, 217 Ala. 685, 117 So. 296). This was necessary that the trial court may determine the respective liabilities of the several sureties, if such there were, as the result of the failure in official duty by the one principal-the county treasurer. The fact of or extent of coliability or right and liability of contribution, as between the respondent surety companies, was determined on the coming in of all the evidence. Eureka Coal Co. v. Louisville & N. R. Co. (Ala. Sup.) 122 So. 169. And the decree was against the principal and surety on the first bond, and not against the surety on the second bond.

In Disheroon et al. v. Brock, 213 Ala. 637, 105 So. 899, it was held:

"In absence of stipulations making bond of public officer retrospective, there can be no liability for default prior to execution.

"In absence of stipulations in bond of public officer making it retrospective, or of estoppel by reason of principal's report or statement for prior term, there can be no liability on bond for default of principal occurring prior to execution of bond."

And the terms of the respective bonds are prospective and effective from the "date of approval" and for the term indicated. The dates of respective approvals of Eason's official bonds by the National Surety Company are: October 11, 1920, judge of probate; October 13, 1920, superintendent of education; November 2, 1921, by the judge of probate, and November 3, 1921, and were for the official term that terminated on September 30, 1924. The bonds of the same county official with the Maryland Casualty Company were approved October 23, 1924, by the superintendent of education for the official term that began on October 1, 1924. The First National Bank of Ozark, where his public funds were deposited, failed on the evening of October 23, 1924, and said public school funds were lost by that failure; the same being on deposit since August 29 or 30, 1924. No public moneys were received by said Eason as school treasurer between said dates last indicated. However, that official made several drafts for amounts that aggregated from $6,000 to $7,000, that were paid by the bank preceding and to the date of October 15th.

It is insisted, when the bank failed, Eason, treasurer, had to his credit $21,628.41. After the failure, that official recovered $1,093.10, which fixed the sum lost to the state at $20,535.23. The evidence shows that the last-named sum could not have been paid before the failure of the bank, or after August or September, 1924.

In Bradford v. State, 204 Ala. 46, 85 So. 435, it is said: "The test of liability here is: (1) Was the county treasurer of public school funds authorized by law to receive such funds? (2) Was Bradford such county treasurer when he received them? And (3) did he receive them by virtue of his office or under color thereof? The first two propositions are not contested; and the mere statement of facts, we think, is all that is necessary to show that these funds came into Bradford's hands as county treasurer of public school funds, by virtue of his office or under color thereof. Mobile County v. Williams, Judge, etc., 180 Ala. 639, 61 So. 963; [Mason] v. Crabtree, 71 Ala. 479. The funds upon which the several warrants were drawn were the public educational funds appropriated and set apart to Marshall county," etc. Such were the funds made the subject of the present suit.

It is certain from the evidence that the deposits made by and as the "county treasurer of school funds" with the bank in question were those of a general deposit, and created the relation of debtor and creditor as affecting that subject-matter. National Comm. Bank v. Miller, 77 Ala. 168, 54 Am. Rep. 50; Alston v. State, 92 Ala. 124, 9 So. 732, 13 L. R. A. 659; Montgomery County v. Cochran (C. C. A.) 121 F. 17; Curtis v. Parker & Co., 136 Ala. 217, 33 So. 935; Clisby v. Mastin, 150 Ala. 132, 43 So. 742, 124 Am. St. Rep. 64; Henry v. Bank, 63 Ala. 527; Wray v. Insurance Co., 34 Ala. 58. It is further declared in this jurisdiction that public funds being placed in a bank-not a designated depository-as a general deposit and without required surety, or in violation of law, constitutes a devastavit or conversion of such moneys or funds. The sureties of such official so acting in making that deposit are liable for a loss of such public moneys, etc., occasioned by the deposit in question. McPhillips et al. v. McGrath et al., 117 Ala. 549, 23 So. 721; Clisby v. Mastin, supra; Moody v. Jacobs, 211 Ala. 291, 100 So. 467; State v. Houston, 78 Ala. 576, 56 Am. Rep. 59.

It has been further declared that the statutes that obtain are read into official bonds, and they are conditioned as required by the statute. Barnes v. Hudman, 57 Ala. 504; U.S. F. & G. Co. v. U. T. & S. Co., 142 Ala. 532, 38 So. 177; Searcy v. Cullman County, 196 Ala. 287, 71 So. 664; Hannis Dist. Co. v. Lanning, 191 Ala. 280, 68 So. 137; American Book Co. v. State, 216 Ala. 367, 371, 113 So. 592. Since the Alston Case, supra, the statute has been amended (section 3973, Code of 1928), as we will later indicate. Statutes of application are Acts Sp. Sess. 1907, p. 162, § 1, amending section 4668, Code of 1896; section 3973, Code of 1928. Moody v. Jacobs, 211 Ala. 291, 100 So. 467.

We should say distinction must be made as to deposits duly entered with county depositories to the credit of the owner or beneficiary of such moneys, and deposits made generally by the official to his credit, as affecting liability for the loss of such funds by the bank's failure.

As we have indicated, the bill was filed, and as amended was maintained, by the state of Alabama in behalf of Dale county and its school districts in interest, against the county treasurer of school funds and the two surety corporations. Eason, the treasurer, and the two surety companies, each denied liability. The surety companies made their answers cross-bills, alleging liability against the other, or coliability and contribution. The trial court dismissed both cross-bills of sureties, adjudged that neither the state nor the first surety, National Surety Company, was entitled to recover from the surety on second bond, Maryland Casualty Company, and that recovery was awarded by the decree for the full amount of the treasurer's default against the National Surety Company occurring under the first bond. The state did not appeal; and the appeal before us is only by the National Surety Company. The state is therefore bound by the decree against it for the Maryland Casualty Company, the time for appeal under the statute having expired.

The provisions of section 3973, Code of 1923, as indicated, were under the subject of embezzlement by public officers, and exempt said officers from criminal liability, for depositing the revenues of the state or county in a bank in "good faith" who require and take from the bank "good and sufficient security." It will be noted that this provision of the statute does not exempt from civil liability. The decisions citing or construing that amendment are not to the contrary. Gerald v. Walker, 201 Ala. 502, 505, 78 So. 856; Moody v. Jacobs, 211 Ala. 291, 100 So. 467; Lacy v. State, 13 Ala. App. 212, 68 So. 706; Ex parte Lacey, 193 ala. 677, 69 So. 1018; Ex parte Cowart, 201 Ala. 55, 77 So. 349; Clisby v. Mastin, 150 Ala. 132, 43 So. 742, 124 Am. St. Rep. 64.

Acts 1915, p. 348, abolished the office of county treasurer and provided that the general funds of the county be deposited in such an incorporated state or national bank as the board of revenue or court of county commissioners may designate to be the depository in lieu of the treasurer, or, where authorized, as by section 5 of the act, designate some individual who may act as treasurer of such county. This act applied to the county's general funds in counties of 50,000 or less population. And it was made the duty (subsection 1, § 211, Code of 1907) of the county treasurer to receive and keep the public monies of the county and disburse the same according to law. The amendment of this subsection by Act Sept. 29, 1919, p. 860, § 1, made no substantial change, and was codified in section 303 of the Code of 1923.

The effect of the act of 1911 was to provide for the office of county treasurer of public school funds in the several counties (Gen. Acts 1911, p. 498), and required...