Scott Cnty. v. Johnson

• Decision Date: 14 December 1928
• Docket Number: No. 38914.,38914.
• Citation: 209 Iowa 213,222 N.W. 378
• Parties: SCOTT COUNTY ET AL. v. JOHNSON ET AL.
• Court: Iowa Supreme Court

209 Iowa 213

222 N.W. 378

SCOTT COUNTY ET AL.

v.JOHNSON ET AL.

No. 38914.

Supreme Court of Iowa.

Dec. 14, 1928.

Appeal from District Court, Scott County; Wm. W. Scott, Judge.

Suit in equity by the county of Scott and its board of supervisors, as such, against Ray E. Johnson, as the treasurer of the state of Iowa, and Frank Reddy, as treasurer of the county of Scott, and certain banks, as the depositories of public funds deposited therein by such county treasurer. The case is prosecuted by the county of Scott as the sole party in interest. It avers that it is the owner of certain funds held by its county treasurer and by the various depositories named, and that the defendants Johnson and Reddy propose to divert the funds so owned by the plaintiff illegally to other uses, than those of the plaintiff, whereby the plaintiff will be deprived of its right of property therein; that such purpose of these defendants is pursuant to the provisions and requirements of chapter 173, 41st Gen. Assem., which statutory provisions are void and of no effect, because unconstitutional. The relief prayed is a perpetual injunction against all the defendants restraining such proposed diversion of the plaintiff's funds. After a trial on the merits, the district court dismissed the petition, and the plaintiff has appealed. Affirmed.Bush & Bush, of Davenport, for appellants.

John Fletcher, Atty. Gen., Maxwell A. O'Brien and Earl F. Wisdom, Asst. Attys. Gen., and John Weir and Bollinger & Block, all of Davenport, for appellees Johnson and Reddy.

Lane & Waterman and Albert W. Hamann, all of Davenport, for appellees Home Savings Bank, Davenport, Iowa, Bettendorf Savings Bank, Bettendorf, Iowa, and Donahue Savings Bank, Donahue, Iowa.

Lane & Waterman, of Davenport, for appellee American Commercial & Savings Bank, Davenport, Iowa.

Jebens & Butenschoen, of Davenport, for appellee Northwest Davenport Sav. Bank, Davenport, Iowa.

EVANS, J.

The avowed purpose of the suit is to challenge the constitutionality of the so-called Brookhart-Lovrien Act, chapter 173, Acts 41st Gen. Assem. For the sake of brevity, the legislation thus assailed will be referred to as the act.

[1] We have no specific procedure for litigating such question in an abstract or declaratory sense. Such question may be litigated concretely by any litigant who shows an infringement of his vested rights by the operation of such alleged unconstitutional statute. Before he can be heard to challenge the constitutionality of the legislation, it is prerequisite that he establish in himself the claimed right, which is alleged to be infringed.

The plaintiff brings its action as the alleged owner of certain public funds, the diversion of which is proposed by the defendants pursuant to the statute. The defendant denies the status of the plaintiff as such owner. This question calls for our first consideration.

Before, and at the time of the enactment of chapter 173, Acts 41st Gen. Assem., the following sections of the statute were in force as existing law: Sections 7404, 5651, 5548, and 4319, of the Code of 1924. We set them forth herein:

“7404. Deposits by County Treasurer. The county treasurer shall, with the approval of the board of supervisors as to place of deposit, by resolution entered of record, deposit state, county, or other funds in any bank or banks in the state to an amount fixed by such resolution at interest at the rate of at least two and one-half per cent per annum on ninety per cent of the daily balances payable at the end of each month, all of which shall accrue to the benefit of the general county fund.”

“5651. Deposit of funds. Treasurers of cities and towns shall, with the approval of the council as to place and amount of deposit, by resolution entered of record, deposit city and town funds in any bank or banks in the city or town to which the funds belong, at interest at the rate of not less than two and one-half per cent per annum on ninety per cent of the daily balances, payable at the end of each month. Interest shall accrue to the benefit of the general fund.”

“5548. Deposit of funds. He shall deposit all funds coming into his hands by virtue of his office, in a bank conveniently located, each deposit to be in the name of his township and at a rate of interest not less than two and one-half per cent per annum on ninety per cent of the daily balances, payable at the end of each month, which interest shall accrue to the benefit of the township road fund.”

“4319. Deposit of funds. It is hereby made the duty of the treasurer of each school corporation to deposit all funds in his hands as such treasurer in some bank or banks in the state at interest at the rate of at least two per cent per annum on ninety per cent of the daily balances payable at the end of each month, all of which shall accrue to the benefit of the general fund of such school corporation; but before such deposit is made, such bank shall file a bond with sureties to be approved by the treasurer and the board of directors of such corporation in double the amount deposited, conditioned to hold the school corporation harmless from all loss by reason of such deposit or deposits; provided that in cases where an approved surety company's bond is furnished, said bond may be accepted in an amount equal to ten per cent more than the amount deposited. Said bond shall be filed with the president of the school board and action may be brought thereon either by the treasurer or the school corporation as the board may elect.”

The act under challenge is in part as follows:

“An act to create a state sinking fund for public deposits and to provide a method for the payment of public funds deposited as provided by law, in banks which have since become insolvent; to provide a manner of collecting the sinking fund and of making disbursements therefrom; to provide for the subrogation of the treasurer of state to the rights of the holders of deposits of public funds in the hands of receivers; to increase the powers of the executive council, town and city councils, boards of school directors and of township trustees, relating to deposits of public funds; to relieve public officers from liability on account of the loss of public funds deposited in legal depositories; to amend, revise and codify sections one hundred thirty-nine (139), forty-three hundred nineteen (4319) and fifty-five hundred forty-seven (5547) of the Code, 1924, relating to depository bonds, and to repeal sections seventy-four hundred five (7405), fifty-six hundred fifty-two (5652), and fifty-five hundred fifty (5550) of the Code, 1924, relating to depository bonds.

Be it enacted by the General Assembly of the State of Iowa:

Section 1. * * * There is hereby created in the office of the treasurer of state a separate fund to be known as the state sinking fund for public deposits and the purpose of said fund shall be to secure the payment of their deposits to state, county, township, municipal, and school corporations having public funds deposited in any bank in this state, when such deposits have been made by authority of and in conformity with the direction of the local governing council or board which is by law charged with the duty of selecting depository banks for said funds. Said funds shall be collected by the treasurer of state as needed and shall be held by him and deposited as other public funds, and at no time shall any call be sent out for the collection of such funds or diversion of interest be commenced when there is a balance on hand in such fund of more than five hundred thousand dollars ($500,000.00). All above a necessary working balance shall be kept invested in United States Government bonds under the direction of the executive council.

Sec. 2. * * * All interest hereafter collected by the state of Iowa from depositories of state funds as provided in section one hundred forty (140) of the Code, 1924, all interest hereafter collected from depositories of the county funds by county treasurers as provided in section seventy-four hundred four (7404) of the Code, 1924, all interest hereafter collected by city treasurers as provided in section fifty-six hundred fifty-one (5651) of the Code, 1924, all interest hereafter collected by school treasurers as provided in section forty-three hundred nineteen (4319) of the Code, 1924, all interest collected by township clerks under section fifty-five hundred forty-eight (5548) of the Code, 1924, and any other interest hereafter collected from depositories of public funds, as provided by statute, is hereby diverted from the general fund or township road fund, as the case may be, and shall be paid into the state treasury and kept in the fund created by this act, or so much thereof as shall be ordered so paid by the treasurer of state. No part of said interest above two and one-half per cent (2 1/2%) per annum shall be so diverted or collected for said sinking fund.”

[2] Prior to the year 1909 there was no statutory provision requiring the payment of interest by depositories of public funds. The sections of the statute quoted above were enacted at different times on and after the year 1909. In the ensuing years, millions of dollars have been collected into the public treasuries pursuant thereto. By such enactments the Legislature created a source of revenue which was nonexistent before. By such statutes no effort was made to allot to particular funds the interest accruing on the respective deposits of such funds. All interest collected on county deposits was allotted to the “general fund” of the county. All interest collected on city deposits was allotted to the “general fund” of the city. All interest collected on deposits of school corporations was allotted to the “general fund” of such corporation, All interest collected on township deposits was allotted to the “road fund” of the township. Under the act complained of, all such allotments were diverted into the state sinking fund. The...