School Township of Eden in Carroll County v. Stevens

• Decision Date: 14 December 1912
• Citation: School Township of Eden in Carroll County v. Stevens, 138 N.W. 927, 158 Iowa 119 (Iowa 1912)
• Parties: SCHOOL TOWNSHIP OF EDEN IN CARROLL COUNTY, STATE OF IOWA, Appellant, v. HENRY STEVENS, Appellee
• Court: Iowa Supreme Court

138 N.W. 927

158 Iowa 119

SCHOOL TOWNSHIP OF EDEN IN CARROLL COUNTY, STATE OF IOWA, Appellant, v. HENRY STEVENS, Appellee

Supreme Court of Iowa, Des Moines

December 14, 1912

Appeal from Carroll District Court.--HON. F. M. POWERS, Judge.

THE plaintiff is a school district. The defendant was its treasurer. This action was brought on his official bond. The defense was that the funds of the plaintiff were lost without fault of the defendant, through the failure of a bank in which they were properly deposited by the defendant in a separate and distinct account. The defendant also filed a counterclaim to recover moneys advanced by him while such treasurer in payment of valid orders and warrants drawn upon him while in such office, and paid by him in advance and in anticipation of the receipt of the public revenues for that purpose. At the close of the evidence the trial court sustained defendant's motion for a directed verdict on the main case and sustained the motion of the plaintiff for a directed verdict on the counterclaim. Both parties appealed. Plaintiff having first appealed, it is denominated the appellant.--Reversed and remanded, on defendant's appeal and affirmed on plaintiff's appeal.

Reversed and remanded.

Reynolds & Meyers, for appellant.

Chas C. Helmer and E. A. Whissler, for appellee.

OPINION

EVANS, J.

The defendant became the plaintiff's treasurer in 1903, and so continued by annual elections until July, 1909. The funds of the plaintiff came into his hands from his predecessor in the form of a check on the Bank of Templeton, a going concern of repute. He deposited the check in the same bank to his account as treasurer of the plaintiff district. Such account continued as a distinct and separate account down to the date of the failure, January 27, 1908, and defendant deposited to such account all the moneys of the plaintiff which came to his hands during such period, and paid all warrants and orders by appropriate checks thereon. There is no claim of any commingling of the funds or of misappropriation of any kind. The amount deposited in such account at the time of the failure was $ 2,011.93. The bank was a private bank owned by one Wilson. Wilson died on January 27, 1908, and an administrator was appointed for his estate, who, as such took possession of the bank but did not operate the same as a bank. Wilson proved to have been insolvent, but this fact was discovered only after his death. The immediate cause of the closing of the bank was the death of Wilson, and not his supposed insolvency. The official bond of the defendant which was in force at the time of the failure was conditioned that he should perform all the duties of his office and that he should "faithfully account for all balances" of money in his hands at the termination of his term of office and "promptly pay over" the same to his successor, and "that he will hereafter exercise all reasonable diligence and care in the preservation and lawful disposal of all the money," etc. The plaintiff brought this action in three counts, upon this bond, and two succeeding bonds executed, respectively, July, 1908, and July, 1909. The defendant is clearly liable, if at all, on the bond in force at the time of the loss, and we need give no separate attention to the other bonds. After the death of Wilson, and while the public funds were apparently "tied up," the officers of the plaintiff issued warrants in the ordinary way, and the defendant paid the same as presented out of his own funds in anticipation of receiving later the necessary public revenues to meet the same. The amount so paid by him over and above the revenues received by him amounted at the close of his service to $ 811.12, which sum he asked to recover by counterclaim. The plaintiff conceded the amount so paid out by the defendant, and tendered him full credit therefor on the original amount of the claim, and only asked to recover from the defendant the balance of $ 1,200 remaining. By way of reply to the counterclaim, the plaintiff pleaded that the payment of warrants by the defendant out of his own funds was voluntary and without authority, and that the plaintiff therefore was not liable therefor. The plaintiff pleaded further, by way of estoppel, that at the annual settlements had between the defendant and the plaintiff's board of directors in July, 1908, and July, 1909, respectively, the defendant reported the full amount of money due the plaintiff as being on hand, and that his report was approved upon such representation.

I. We will give our first attention to the controversy as presented in the main case. The contention of plaintiff is that the liability of the defendant for the money coming into his hands as treasurer is absolute, and that no defense of diligence is available to him. In support of this contention, reliance is had upon the following cases: District Township v. Morton, 37 Iowa 550; District Township v. Smith, 39 Iowa 9; District township v. Hardinbrook, 40 Iowa 130.

The contention of the defendant is that, in the course pursued by him for the care of the public funds, he performed his full duty as indicated by the conditions of his bond, in that he used every diligence which could have been within the contemplation of himself or of the public corporation which he served. In support of this contention, reliance is had upon Ross v. Hatch, 5 Iowa 149, and the recent case of Hansen v. Independent District, 155 Iowa 264, 135 N.W. 1090. The plaintiff contends that the holding of the court in the last two cases cited is not consistent with the holding in the Morton, Smith and Hardinbrook cases. We think there is force in this contention, although the court in the Smith case assumed to distinguish such case from the case of Ross v. Hatch, supra. It was there said that the liability of the treasurer was determined by the conditions of his bond. In the Ross case, the conditions of the bond bound the treasurer to "reasonable diligence and care." This provision was not contained in the bonds involved in the later cases of Smith, Morton, and Hardinbrook, above cited. Such provision was contained in the bond involved in the Hanson case, supra, and is contained in the bond involved herein. The present case therefore comes within the letter of the Ross and Hanson cases, supra, and within the distinction made in the Smith case, supra. We are not quite willing, however, to lean upon so fine a distinction, and are inclined to the view that one line of decisions ought to be followed and the other frankly overruled. The Morton, Smith, and Hardinbrook cases were all decided at about the same time. They were put largely upon the ground of public policy. The defense presented in one of the first two cases was that the money had been burned by accident, and the defense presented in the other was that the money had been stolen. Such defenses were in their nature comparatively easy to fabricate. The public corporation would naturally encounter great difficulty in meeting evidence produced in support of such a defense, even though fabricated. The same rule, however, was applied in the Hardinbrook case, wherein the defense of loss by bank failure was presented. In these cited cases, emphasis was laid upon the provision of the statute requiring the treasurer to "hold" the money. It was the current judicial opinion at that time that a public treasurer could not lawfully deposit public funds in a bank, and that to do so, however innocently in a moral sense, would amount to a technical conversion. Lowry v. Polk County, 51 Iowa 50, 49 N.W. 1049 (later overruled). Since that time the ordinary methods of business and of the care and disbursement of funds have been quite revolutionized. The statute which required the treasurer to "hold" the money has been slightly amended by the elimination of the word "hold" and the substitution therefor of the word "receive." Code, Section 2768. The substitution is not very important in its effect upon the statute as a whole, but the word "receive" does not lend itself readily to the degree of emphasis which was formerly placed upon the word "hold." The doctrine that a general deposit of public funds in a bank to the separate account of the officer as such is of legal necessity a technical conversion has been repudiated. Officer v. Officer, 120 Iowa 389, 94 N.W. 947; Hunt v. Hopley, 120 Iowa 695, 95 N.W. 205; Hanson v. Roush, 139 Iowa 58, 116 N.W. 1061; Brown v. Sheldon Bank, 139 Iowa 83, 117 N.W. 289.

It is held, in effect, in the foregoing cases, that the adoption of this method of caring for public funds, their identity being carefully preserved by separate and distinct accounts, as such, is not only permissible but commendable. In the light of modern methods of business, it would be difficult to specify a safer method of care and custody than is thus provided. Indeed, it might be a fair question whether, in the absence of excusing circumstances, a treasurer could properly ignore such facilities and subject public funds to the risk of loss naturally incident to a personal custody of currency. Where such course is followed, we can see no reason of public policy to be subserved by declaring for a rule of absolute liability of the treasurer, notwithstanding the exercise of all...