State v. McGraw
| Decision Date | 18 July 1925 |
| Docket Number | 5780. |
| Citation | 240 P. 812,74 Mont. 152 |
| Parties | STATE ex rel. v. McGRAW, County Treasurer. SCHOOL DIST. NO. 4, ROSEBUD COUNTY, |
| Court | Montana Supreme Court |
Application for writ of mandate by the State of Montana, on the relation of School District No. 4, Rosebud County, against John McGraw, County Treasurer of Rosebud County. Writ issued.
Spaulding & McConnell, of Helena, Arthur W. O'Rourke, of Forsyth and Hugh T. Carter, of Helena, for relator.
L. A Foot, Atty. Gen., and A. H. Angstman, Asst. Atty. Gen., for respondent.
C. H Loud, of Miles City, amicus curiæ.
A rehearing having been had herein, the original opinion handed down on July 18, 1925, is withdrawn and modified to read as follows:
This matter is before us on an original application for a writ of mandate to compel the defendant, as treasurer of Rosebud county, to restore the several funds of the school district, plaintiff, to their condition prior to the alteration of his books on May 30, 1925, and to honor and pay warrants regularly drawn on such funds.
To the complaint the defendant has interposed a general demurrer, which admits the truth of all matters properly pleaded in the application. These allegations are that plaintiff was at all times mentioned, and now is, a duly created and existing school district of Rosebud county, and that the defendant was at all such times, and now is, treasurer of said county; that during the past three years, four county depositories, each having on deposit county funds, have been closed by the proper authorities; that on April 30, 1925, the books of the defendant treasurer showed a total credit to plaintiff, distributed to its several funds, of $27,739.29; that on May 30, 1925, the defendant so altered the entries in his said books that more than 90 per cent. of this credit was wiped out, which action was taken on direction of the then state bank examiner to all county treasurers to prorate among all funds shown in his books the amount on deposit in each closed depository, and, as payments are received from such banks, to credit each of such funds with its pro rata share of such payments.
Counsel for plaintiff contend that: (1) By virtue of the provisions of section 1213, Revised Codes of 1921, which requires the treasurer "to receive and hold all school moneys as special deposit," school moneys are a trust fund, and the county stands in the position of bailee thereof; and (2) that, in any event, the county treasurer is the agent of the county in accepting school funds, and therefore that the county is responsible for such funds.
1. The term "special deposit" has a specific meaning in the law, and, to constitute the relation of bailor and bailee, the deposit must be of some specific thing or sum of money for safe-keeping only, and contemplates the return thereof to the depositor or another intact, or a deposit for some specific purpose not contemplating a credit of general account (3 R. C. L. 517), as, for example, the deposit of a package of marked bills to be returned on demand (Fogg v. Taylor, 109 Me. 109, 82 A. 1008, 39 L. R. A. [N. S.] 847, Ann. Cas. 1913E, 41); a sum in gold coin deposited to protect the sureties on a bail bond and to be returned when liability on the bond ceases (Anderson v. Pacific Bank, 112 Cal. 598, 44 P. 1063, 32 L. R. A. 479, 53 Am. St. Rep. 228); money left with a bank to be paid to another on delivery of deed in fullfilment of a land contract ( Kimmel v. Dickson, 5 S. D. 221, 58 N.W. 561, 25 L. R. A. 309, 49 Am. St. Rep. 869); deposit for transmission to another (Cutler v. American Ex. Bank, 113 N.Y. 593, 21 N.E. 710, 4 L. R. A. 328); the proceeds of a draft for collection and remittance (State v. Ross, 55 Or. 450, 104 P. 596, 106 P. 1022, 42 L. R. A. [N. S.] 601).
The manner in which a county treasurer receives, holds (until warrants therefor are presented), and distributes school funds impresses upon them the character of a general and not a special deposit, and the mere declaration of the Legislature cannot change their nature. The term is used only to declare that the treasurer, as a matter of bookkeeping, cannot mingle the funds with other funds in his hands, but must keep a special account thereof.
2. The county is a subdivision of the state, a body politic and corporate, with certain definite and fixed powers and duties. Sections 4293 and 4441, Rev. Codes 1921; Bignell v. Cummins, 69 Mont. 294, 222 P. 797, 36 A. L. R. 634. The members of the board of county commissioners, acting while in session, are the executive officers of the corporation, with powers and duties definitely fixed by statute. Section 4465, Rev. Codes 1921, chapter 95, Laws of 1923; Williams v. Board of Commissioners, 28 Mont. 360, 72 P. 755. These powers are limited by statute, and any action taken must be justified by the provisions of law defining and limiting the powers conferred. State ex rel. Lambert v. Coad, 23 Mont. 131, 57 P. 1092; Yegen v. Board of County Commissioners, 34 Mont. 79, 85 P. 740; Hersey v. Neilson, 47 Mont. 132, 131 P. 30, Ann. Cas. 1914C, 963.
Each school district within the county is no less a corporation with definite and limited powers and duties. Section 1022, Rev. Codes 1921; Finley v. School District, 51 Mont. 411, 153 P. 1010. It has all the necessary and proper authority for its own government, independent of the county; its executive head is its board of trustees, acting in the manner prescribed by law. Sections 1005 and 1020, Rev. Codes 1921; O'Brien v. School District, 68 Mont. 432, 219 P. 1113.
The Legislature had the power, had it seen fit, to have provided for a treasurer of each school district and required the county treasurer to pay over to the district treasurer the moneys received for the use and benefit of each district, as it did with respect to cities. Section 5214, Rev. Codes 1921. Under such a provision plaintiff's contention would be correct; the county treasurer would not be the legal custodian of school district funds as he is not of city funds. State ex rel. City of Cut Bank v. McNamer, 62 Mont. 490, 205 P. 951. But evidently for convenience and to do away with the unnecessary duplication and expense, the Legislature saw fit to require the county treasurer to perform the duties which would otherwise have fallen upon the district treasurer of each school district within his county (section 1213, Rev. Codes 1921), and to further provide, in the general law defining the duties of that officer, that he shall "receive all moneys belonging to the county, and all other moneys by law directed to be paid to him, safely keep the same, and apply and pay them out, rendering account thereof as required by law." Section 4750. Regarding county funds, he must render his account to the board of county commissioners (section 4761, above), and, as to school funds, he must account to the county superintendent of schools (section 4750, subds. 7 and 9).
Had we no further statute on the subject of the safe-keeping of the funds paid into the county treasury, the effect of the foregoing provisions would be to make the county treasurer the custodian of school funds, and, as to them, not the agent of the county, but of the school district and of all other branches of the government whose funds he may have (Interstate National Bank v. Ferguson, 48 Kan. 732, 30 P. 237; Goodrich v. Bashford, 2 Ariz. 246, 12 P. 671; Lancaster County v. State, 97 Neb. 95, 149 N.W. 331; Gray v. Board, 93 N.Y. 603; Commissioners v. Springfield, 36 Ohio St. 643), and to render him and his official bondsmen liable therefor (Goodrich v. Bashford, above). The authorities cited above were, with one or two exceptions which will be discussed later, decided under statutory provisions similar to those heretofore referred to, and without reference to such a provision as that which we will now consider.
In 1913 the legislative assembly saw fit to entirely change the relation of all parties concerned toward the funds in the county treasury by the enactment of chapter 88, Laws of 1913, now section 4767, Revised Codes of 1921, which requires the county treasurer to "deposit all public moneys in his possession and under his control" in such banks as "the board of county commissioners shall designate, and no other," after receiving from such banks "such security in public bonds or other securities, or indemnity bonds, as the board of county commissioners * * * may prescribe, approve, and deem fully sufficient and necessary to insure the safety and prompt payment of all such deposits on demand." The section provides that such deposits shall bear interest at the rate of 2 1/2 per cent. per annum, and that "all interest paid and collected on such deposits shall be credited to the general fund of the county." It concludes:
"Where moneys shall have been deposited in accordance with the provisions of this act, the treasurer shall not be liable for loss on account of any such deposit that may occur through damage by the elements, or for any other cause or reason occasioned through means other than his own neglect, fraud, or dishonorable conduct."
Loss through the failure of a bank cannot be attributed to the "neglect, fraud or dishonorable conduct" of the treasurer, and it will be seen by a careful reading of the above section that, whereas under the general law the county treasurer is made responsible for the funds in his hands, charged with their safe-keeping and liable for their loss, all control over the funds and all responsibility for their safe-keeping is by the statute referred to taken from him, and he and his bondsmen are relieved from all liability for the loss of such funds.
3. On rehearing the Attorney General, for the first time, contended that school district funds are not ...
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