State ex rel. City of Grinnell v. Carney, 37946.

• Decision Date: 17 January 1928
• Docket Number: No. 37946.,37946.
• Citation: 217 N.W. 472,208 Iowa 133
• Parties: STATE, FOR USE OF CITY OF GRINNELL, POWESHIEK COUNTY, v. CARNEY ET AL.
• Court: Iowa Supreme Court

208 Iowa 133

217 N.W. 472

STATE, FOR USE OF CITY OF GRINNELL, POWESHIEK COUNTY,

v.CARNEY ET AL.

No. 37946.

Supreme Court of Iowa.

Jan. 17, 1928.

Appeal from District Court, Poweshiek County; D. W. Hamilton, Judge.

Action on the official bond of a city treasurer to recover city funds not turned over by him to his successor. The court directed a verdict for the plaintiff for the amount claimed. Defendants appeal. Affirmed.

Albert and De Graff, JJ., dissenting.Carr, Cox, Evans & Riley, of Des Moines, and Frank Bechly, of Montezuma, for appellants.

Talbott & Talbott, of Brooklyn, for appellee.

FAVILLE, J.

Defendant Carney was city treasurer of the city of Grinnell for the term commencing January 1, 1924, and ending April 1, 1925. On January 23, 1924, said treasurer executed his official bond with the American Surety Company as surety, in the penal sum of $50,000, the condition of said bond being that the said Carney, as treasurer, “shall promptly pay over to the person or officers entitled thereto all money which may come into his hands by virtue of said office.” As treasurer, Carney deposited city funds in the Merchants' National Bank of Grinnell, Iowa, of which he was an officer; the last of said deposits being made on October 25, 1924. The bank closed on November 1, 1924, and there was then on deposit in said bank the sum of $61,917. It appears that $50,000 of this sum was secured by a depositary bond executed by said bank and a surety, and that said amount has been paid. This action is to recover the balance of said deposit, less a credit for a dividend that has been paid by the receiver of said bank. Carney resigned as treasurer on January 22, 1925. He did not turn any of said money over to his successor.

The appellants pleaded that all the money deposited in the said bank by the treasurer was under the authority of a resolution of the city counsel of said city, adopted January 7, 1924, the same being as follows:

“Be it resolved by the city council of the city of Grinnell, Iowa, that the Merchants' National Bank of Grinnell, Iowa, is hereby made the depository for all funds of the city of Grinnell, Iowa, coming into the hands of the treasurer of the city of Grinnell, Iowa.”

The court, on motion, struck the allegation setting forth said resolution from the defendants' answer. The appellants rely upon Officer v. Officer, 120 Iowa, 389, 94 N. W. 947, 98 Am. St. Rep. 365,School Township of Eden v. Stevens, 158 Iowa, 119, 138 N. W. 927,Hanson v. Roush, 139 Iowa, 58, 116 N. W. 1061, and similar cases holding to the effect that, when a custodian of public funds deposits the same in a bank, he is not liable for loss, unless he is negligent in selecting the depositary. Appellants contend that said resolution of the city council negatives any claim of negligence of the treasurer, in the event that funds are deposited by him in the designated depositary. The foregoing cases were decided by this court prior to the enactment of section 660a of Code Supp. 1913. Said section is as follows:

“That treasurers of cities of the first and second class, cities operating under special charter and cities under the commission form of government shall, with the approval of the city council as to place and amount of deposit, by resolution entered of record, deposit all city funds in any bank or banks in the city to which the said funds belong, at interest at the rate of not less than two per cent. per annum on ninety per cent. of the daily balances payable at the end of each month, all of which interest shall accrue to the benefit of the general city fund; but before such deposit is made in any bank it shall file a bond for double the amount deposited with sureties to be approved by the treasurer and the city council and conditioned to hold the treasurer 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 of ten per cent. more than the amount deposited. Said bonds shall be filed with the city clerk and action shall be brought thereon by the treasurer or the city as the council may elect.”

[1] This statute was undoubtedly passed to meet the situation that had been created by the previous holdings of this court in the cited cases. Appellants rely upon a change in phraseology in the provisions of sections 5651 and 5652 of the Code of 1924. Said sections of the Code did not become effective until midnight of October 27, 1924. Clingingsmith v. Jackson Dairy Co., 202 Iowa, 773, 211 N. W. 413. The last deposit having been made on October 25, 1924, the case must be ruled at this point by the statute then in force, to wit, section 660a of Code Supp. 1913.

There is no question involved in this case with regard to $50,000 of the money which was deposited by the treasurer in the bank. The amount involved in this action is only the excess above the amount that was protected by the depositary bond of the bank. Appellants' contention is that, by virtue of said resolution, it was the duty of the treasurer to deposit all city funds coming into his hands in the designated depositary bank, and that, having done so, neither he nor the surety on his bond as treasurer can be held liable for any funds so deposited, even though they exceeded in amount the liability of the depositary bond.

[2][3] It is obvious that the city council could not by resolution absolve the treasurer and his official bond from liability for funds deposited in a bank merely by the adoption of a resolution directing the city treasurer to deposit the fund. The city council had no jurisdiction in regard to said funds, except as conferred upon it by the quoted statute. This provided that the city council, by resolution of record, could authorize the deposit of city funds in a bank, and require that, before such deposit was made, a bond must be filed for double the amount deposited, with sureties to be approved by the treasurer and the city council. The limit of the authorized deposit under this statute was necessarily covered by the provisions of the bond. In other words, under this statute, the city council could properly designate a certain bank as a depositary, and authorize the city treasurer to deposit funds in said bank to an amount protected and covered by the depositary bond. It could not, under such statute, authorize the city treasurer to deposit funds in said bank in excess of the amount protected by said depositary bond, or to deposit funds without any depositary bond. The council, having named the depositary and fixed the amount of the bond, and approved the same, did by said act necessarily fix and limit the amount of funds that the treasurer could legally deposit in said bank. Any amount deposited by the treasurer in excess of said amount so fixed would not be protected by said depositary bond, would be in contravention of the provisions of the statute, and would be in exactly the same situation as though the treasurer had deposited the same in some other bank. It is to be observed that said statute required the city treasurer to deposit the city funds in approved depositaries where they were protected by proper depositary bonds. The statute is mandatory that the treasurer “shall” deposit city funds in a designated depositary, where they shall be protected by a proper depositary bond. Provision is made for making such deposits in any bank or banks in the state that will accept the same on the terms and conditions of the statute, if no bank in the city will accept them. Code Supp. 1913, § 660b. Therefore, if the treasurer has in his hands funds which he sees fit not to deposit in the designated depositary, he certainly must be held liable therefor under the provisions of the statute on his official bond. If the amount of said funds in his hands exceeds the amount that he may lawfully deposit in the designated depositary under the protection of the bond furnished by it, then the city treasurer must see to it that another depositary is designated, and a new bond given, or that the amount authorized to be deposited in said designated depositary is increased to meet the new conditions, and is protected by an approved bond. The city council could not, by resolution, authorize the treasurer to deposit funds in excess of the amount protected by the depositary bond any more than it could by resolution authorize the treasurer to deposit funds in some depositary without the same being protected by any depositary bond. It is to be observed that the statute has been amended. See Code 1927, § 5651 et seq. At this point we hold that the court did not err in striking from the appellants' answer the allegations with respect to the said resolution adopted by the city council.

[4][5] II. It is contended that the court erred in striking from the amendment to the appellants' answer an allegation to the effect that the treasurer believed the bank in which he deposited said funds to be a safe depositary, and believed that the same was a solvent and safe institution for the custody of said fund, and that he was not negligent in depositing the same in said bank. As we have heretofore pointed out, the question of the negligence of the treasurer in depositing said excessive funds in said bank is not involved in this case. The statute governs the matter of deposits of said funds. The statute is mandatory, and not merely permissive. The provision is that the treasurer “shall, with the approval of the city council as to place and amount of deposit, by resolution entered of record, deposit all city funds in any bank or banks in the city. * * *” It is not a question of whether the treasurer used good faith, or was or was not guilty of negligence in depositing the funds of the city in an unauthorized manner. The statute directs how city funds shall be deposited by a city treasurer. That is the sole manner provided by statute. Obedience to the statute protects...