State v. Krause

• Decision Date: 10 February 1925
• Citation: State v. Krause, 186 Wis. 59, 202 N.W. 319 (Wis. 1925)
• Parties: STATE v. KRAUSE ET AL.
• Court: Wisconsin Supreme Court

186 Wis. 59

202 N.W. 319

STATE

v.KRAUSE ET AL.

Supreme Court of Wisconsin.

Feb. 10, 1925.

Appeal from Circuit Court, Dane County; E. Ray Stevens, Judge.

Action by the State against Henry Johnson, former State Treasurer, the American Surety Company of New York and others, sureties on his bonds, and Gottlieb Krause and others, sureties on bonds of State Depository, in which Gottlieb Krause and others filed cross-complaints against the other defendants. From an order overruling demurrers of defendant Johnson and the sureties on his bonds to complaint of plaintiff and cross-complaints of the other defendants, defendant Johnson and his sureties appeal. Reversed and remanded, with directions.

Appeal from an order of the circuit court for Dane county, Hon. E. Ray Stevens, judge, overruling the demurrers of the appellants to the amended complaint of the plaintiff and the cross-complaints of the defendants.

The amended complaint, among other things, alleges that the defendant Johnson was the duly elected and qualified treasurer of the state, from January 6, 1913, to January 1, 1923; that the corporations appealing herein are the sureties upon his bonds; that, at all times mentioned in the complaint, the Jackson State Bank was a state banking corporation, and, having complied with all the requirements of law, was designated as a depository for the deposit, by the state treasurer, of state funds.

The defendants and respondents herein are the sureties on the bonds of the bank, which were executed in order to qualify such bank from time to time as a state depository; that on the 11th day of February, 1915, the state treasurer had on deposit in said bank state funds amounting to $5,561.12, and that the board of deposits on that day instructed the treasurer to decrease instead of increase the amount of state funds on deposit in said bank; that on the 22d day of December, 1922, it appearing that said bank was insolvent, the banking commissioner took possession of the same, with all the assets of the institution, for the purpose of liquidating its affairs, and that such liquidation proceedings still continue, and are not completed; that the defendant Johnson, as state treasurer, from time to time after the instructions thus given by the state board of deposits, violated the same and continued to make deposits in said bank and to withdraw funds therefrom, in such a manner as to leave large balances in excess of $5,561.12 on deposit in said bank; that, at the time the banking commissioner assumed charge of the affairs of the bank, the amount on deposit by the state treasurer in said bank was the sum of $19,044.09, which amount has been reduced by dividends in the sum of $3,808.32.

In its complaint the plaintiff prays for judgment against Johnson and the sureties on his bonds, and also against the sureties of the bank, for the amount of the balance and interest due it, etc. The various defendants, sureties upon the bonds of the depository, in their cross-complaints, duly filed and served, pray for judgment against Johnson, and the sureties on his official bonds, for the amount of their liability when determined, upon the theory that the loss was sustained by the failure of the state treasurer to comply with the instructions of the state board of deposits as aforesaid. The defendant Johnson, and the sureties upon his bonds, each served and filed a general demurrer to the complaint of the plaintiff, and they likewise demurred to the cross-complaints of the sureties upon the bonds of the depository, which demurrers were by the order of the trial court overruled; and from such order the appellants herein have prosecuted this appeal.Olbrich, Brown & Siebecker, of Madison, for appellant Johnson.

McGovern, Hannan, Devos & Reiss, of Milwaukee, for appellants Maryland Casualty Co. and others.

Upham, Black, Russell & Richardson, of Milwaukee (M. B. Olbrich, of Madison, of counsel), for appellant American Surety Company.

H. L. Ekern, Atty. Gen., and Winfield W. Gilman, Special Counsel, of Milwaukee, for the State.

Frank W. Bucklin, of West Bend, and William Ryan, of Madison, for respondents Krause and others.

Seher & Seher, of Milwaukee, for respondent Dallman.

O'Meara & O'Meara, of West Bend, for respondents Groth and another.

DOERFLER, J. (after stating the facts as above).

Under the provisions of section 7, art. 10, of the Constitution, the secretary of state, the treasurer, and the Attorney General shall constitute the board of commissioners of public lands. Section 14.43 of the statutes provides:

“Any national or state banking corporation which is approved by the ‘board of deposits,’ consisting of the commissioners of public lands and the Governor, may, upon filing a bond as hereinafter provided, and upon the compliance with all other requirements of law, become a state depository. * * *”

Section 14.46, Statutes of 1923, provides:

“ Treasurer's Liability, under the direction of the board of deposits, the state treasurer may deposit with any depository which has fully complied with all requirements of law any state moneys in his hands or under his official control, and any sums so on deposit shall be deemed to be in the state treasury, and said treasurer shall not be liable for any loss thereof resulting from the failure or default of any such depository without fault or neglect on his part or on the part of his assistant or clerks. However, the amount at any time on deposit with any depository shall not exceed its actual paid-up capital, nor one-half of the penalty of the bond filed by it, nor the amount prescribed by the board of deposits, if any be prescribed.”

Section 14.48 of the statutes requires the state depository to file with the secretary of state on the 1st day of each month, and oftener when required, a sworn statement of the amount of public moneys deposited with it, and a quarterly statement of all deposits and payments of state moneys during the preceding quarter, etc. Subsection 8 of section 14.42, statutes, requires the treasurer to report to the Governor quarterly the amounts that are on deposit in each of the state depositories, etc. Subsection 13 of section 14.30 requires the Governor and the Attorney General to examine the accounts of the state treasurer at least once in each quarter. Subsection 3 of section 14.44, Statutes of 1923, requires every bank designated as a state depository to renew its bonds to the state treasurer every four years, unless otherwise ordered by the state board of deposits. The board of deposits may also require new bonds at any time when they deem it necessary.

[1] The foregoing statutes, with few changes, not material here, have been in force during all periods of time involved herein. The moneys deposited by the state treasurer in these depository banks, under the express language of the statute, are deemed to be in the state treasury. The provisions of section 14.46 of the statutes, which limits the amount which a state treasurer can legally deposit with an approved depository to the amount of the actual paid-up capital of the bank and one-half of the penalty of the bond filed by it are general provisions, and apply equally to all state depositories. No warrant can be given to the treasurer in any event to exceed these specific limitations, and no claim is made herein by any of the parties that such limitations have been exceeded.

[2] It is argued, however, by the Attorney General and counsel for the sureties on the bonds of the depository, that, where an amount is fixed below the general limitations above referred to, by the state board of deposits, it becomes an imperative duty on the part of the state treasurer not to exeed this amount, and that failure to comply with the directions of the board of deposits in this behalf amounts to a violation of the statutory duties of the treasurer, pursuant to which a liability springs up in favor both of the state and of the sureties of the depository. The instruction given by the state board of deposits on February 11, 1915, are not couched in as clear and definite language as the statute would seem to require. The statute contemplates a definite and fixed amount. The instructions given are that the treasurer shall decrease instead of...