State v. Copeland

• Decision Date: 02 March 1896
• Citation: 34 S.W. 427,96 Tenn. 296
• Parties: STATE, to Use of OVERTON COUNTY, v. COPELAND et al.
• Court: Tennessee Supreme Court

34 S.W. 427

96 Tenn. 296

STATE, to Use of OVERTON COUNTY, v. COPELAND et al.

Supreme Court of Tennessee.

March 2, 1896

Appeal from chancery court, Overton county; T. J. Fisher Chancellor.

Bill filed by the state of Tennessee, for the use of Overton county, against Hardy Copeland and others, sureties on his official bond as county trustee. Judgment for complainant and defendants appeal. Reversed.

Vertrees & Vertrees, J. A. Barnes, W. W. Goodpasture, and W. H Hussey, for appellants.

G. B Murray, for appellee.

WILKES J.

This is a bill against the defendant Hardy Copeland and others, as sureties upon his official bond as county trustee of Overton county, for school taxes deposited by him in the Nashville Savings Company, at Nashville, Tenn., called in the record and generally known as "Marr's Bank." Upon the hearing, the chancellor gave judgment against the defendants for $3,119, and interest from October 12, 1895, and all costs, and the defendants have appealed and assigned errors. These assignments are as follows: (1) In finding that Mr. Copeland was not sufficiently careful and diligent; (2) in holding that Mr. Copeland should have acted only upon an examination of the bank, made or caused to be made, or upon knowledge; (3) in holding that Mr. Copeland, as trustee, was bound, in law, to account for and pay over this fund, unless it was lost by the act of God or the public enemy; (4) in rendering a decree against Mr. Copeland and his sureties for the full penalty of the bond, to be discharged upon the payment of $3,119 and interest; (5) in rendering a decree against the defendants for said $3,119, interest, and costs; (6) in not rendering a decree dismissing the bill.

Only two real questions are presented, the first of which is whether Copeland was an insurer of the safety of the funds in his hands, and the other whether, if not an insurer, he exercised that degree of care that he should have done for the safe-keeping of the funds in his hands. We consider the first proposition primarily, for, if it be held that the trustee is liable for such funds, in every event and under all contingencies, except when the loss arises from the act of God or the publc enemy, then the latter question is immaterial, and need not be considered. The learned chancellor in the court below delivered a written opinion, from which the reasons and grounds of his decision may be gathered. He says: "I am fully satisfied that Copeland did not intend or expect to lose the money when he placed it in Marr's Bank, and he believed it was safe there until a very short time before the bank failed, and perhaps up to the day of its closing." The chancellor then adds: "In the view I take of the case, conceding that Copeland acted in good faith, believing that this bank was entirely safe, the question is, can a trustee make such a defense avail him in case the money is lost by the failure of the bank?" And the chancellor finally says: "I am constrained to hold that the defendant Copeland and his sureties are responsible for the money under the facts of this case, both upon the ground that the defense set up in the answer, that the bank had a good reputation, was an old bank of high standing, that the deposit was made in good faith and confidence, and lost by the failure of the bank, and without negligence on the part of Mr. Copeland, was not good in law, and also that the facts do not establish that high degree of diligence that would excuse defendants from accounting for the money even under the rule requiring a 'faithful discharge of duty.' *** This is not a question of intent. It is a question of diligence or negligence, in a legal sense." The question of the measure of liability of a public officer for funds in his hands is one of prime importance, and at the same time one upon which there is some diversity of opinion. In some cases, the liability of the officer is made to turn upon the terms of his bond, and it is construed as having been enlarged, and made an absolute engagement to pay over the money in any event, and under every contingency. In other cases, the officer is regarded as a debtor for the funds that go into his hands, and not a bailee or trustee of such funds. In other cases, the officer is held liable on broad grounds of public policy, and the obligations resting upon him are made absolute and unconditional, because a different construction would open up a door for fraudulent practices and evasions by public officials. The matter is forcibly presented in the notes to State v. Harper, reported in 67 Am. Dec. 363-373, and also in the case of Wilson v. People (Colo. Sup.) reported in 22 Lawy. Rep. Ann. 451, and notes (34 P. 944), where the several grounds of liability are referred to, and the cases cited under each.

Considering these grounds of liability in the order named, it is evident that the terms of the bond must have some weight in determining what the liability of the officer is. But the main object of the bond, under our law, is not to fix the limit of the officer's liability, but to superadd the security of the bondsmen to that of the principal. The liability of the bondsmen is outlined in the bond, but, after all, the extent of liability of both principal and sureties, and the obligations they are under, are fixed and limited by the statutes and laws relating to such officers. The bond required of the county trustee, to cover school funds, is a special one. Mill. & V. Code, § 712. The bond executed by the defendant is in these words: "Now, therefore, should the above bounden Hardy Copeland truly and faithfully perform the duties of the office of county trustee for the term of his office, and shall faithfully collect and pay over, within the time and in the manner prescribed by law, to the proper officer designated by the laws of Tennessee to receive the same, all school taxes by him collected, or that ought to be collected during his said term of office, then this obligation to be void; otherwise, to remain in full force and effect." The oath required of the officer is to the same effect as the bond. Mill. & V. Code, § 716. The trustee is required to keep the school funds separate from all others (Mill. & V. Code, § 1167); and to use it, directly or indirectly, or to receive or agree to receive any fee or interest from any bank for the deposit or use of the money, is made a felony (Acts Ex. Sess. 1885, c. 16). The bond does not, in terms, fix the extent of the officer's liability. That is regulated by law, and we are of opinion that there is nothing in the terms of the bond or the requirements of the statutes that makes the officer liable as on contract to keep, at all hazards, and under every contingency, and to pay over funds in his hands, but he is only obligated to pay according to law. Can he, under our law, be held as a debtor for the fund, and hence liable for it in any event? If so, he is impliedly given the right to use the funds, to receive and retain interest upon them and to use them as his own. In the cases holding this doctrine, it is laid down that, if the officer make a profit or interest by using the fund, he is not liable therefor, but the usufruct belongs to him. This is certainly not the theory of our law, which makes it a felony for the officer to use it, directly or indirectly, or to receive or agree to receive any interest from any bank for the use or deposit of it; and not only is it contrary to the statute, but, in our view, it is unwise policy to consider the officer as a debtor. He is a trustee charged by statute with certain duties and responsibilities, but having no right to use the funds for his own purpose or to make them his own.

The third class of cases so construes the bonds, and so fixes the duties of public officers holding public funds, as to make them insurers of the safety and forthcoming of the fund, upon broad grounds of public policy. The leading case holding this doctrine of strict accountability is that of U.S. v Prescott, 3 How. 589. In that case the bond was conditioned to keep safely, and pay over when required to do so, and the court held the officer liable, although the funds were stolen without fault on the part of the officer. This was followed in U.S. v. Dashiel, 4 Wall. 182, where the condition of the bond was to pay over and account, and in Boyden v. U. S., 13 Wall. 17, where the condition of the bond was to discharge all the duties, and, under the act of congress, it was the duty of the officer to pay over. This was followed by the case of U.S. v. Morgan, 11 How. 154; Bevans v. U. S., 13 Wall. 56; U.S. v. Keehler, 9 Wall. 83; U.S. v. Watts, 1 N. M. 553; State v. Nevin (Nev.) 7 Pac. 650. The rule has been followed in many cases in the state courts, and evidently on the authority of the leading case. We cite only a few by way of illustration. In State v. Moore, 74 Mo. 413, the bond was "to perform all the duties," and the statute made it a duty to "deliver to his successor all money," and the officer was held liable for depositing money, as treasurer, in a bank of high standing, that subsequently failed. In Supervisors v. Kaime, 39 Wis. 468, the bond was "to faithfully discharge the duties," and "properly and legally disburse and pay all moneys," and the officer was held liable for a deposit in a bank of good reputation, but which afterwards failed. In State v. Croft, 24 Ark. 550, the condition was "safely to keep the money," and it was lost by failure of a bank reputed to be good, and the officer was held liable. See other cases cited in 22 Lawy. Rep. Ann. 451, in the notes to the case of Wilson v. People (Colo. Sup.) reported also in 34 P. 944; State v. Harper, 67 Am. Dec. 363, and notes; 2 Am. & Eng. Enc. Law, 4661, 466m, notes 1, 2. It is evident that the chancellor...