Sullivan v. City of Galveston

• Decision Date: 10 April 1928
• Docket Number: (No. 9218.)
• Citation: 17 S.W.2d 478
• Parties: SULLIVAN et al. v. CITY OF GALVESTON.
• Court: Texas Court of Appeals

17 S.W.2d 478

SULLIVAN et al. v. CITY OF GALVESTON.

(No. 9218.)

Court of Civil Appeals of Texas. Galveston.

April 10, 1928.

Rehearing Denied May 2, 1929.

COPYRIGHT MATERIAL OMITTED

Appeal from District Court, Galveston County; C. G. Dibrell, Judge.

Suit by the City of Galveston against Tim Sullivan and another. Judgment for plaintiff, and defendants appeal. Affirmed.

Maco Stewart, of Galveston, and Albert J. De Lange, of Houston, for Tim Sullivan.

Lockhart, Hughes & Lockhart, of Galveston, for D. W. Kempner.

Terry, Cavin & Mills, of Galveston, for R. Lee Kempner.

Bryan F. Williams, of Galveston, for City of Galveston.

LANE, J.

The city of Galveston brought this suit against Tim Sullivan and D. W. Kempner to recover upon the following bond:

"Ed. McCarthy, who carries on a banking business in the City of Galveston, Texas, under the name of Ed. McCarthy & Co., having been by the Board of Commissioners designated as one of the banks in which Treasurer of the said City is directed and authorized to deposit sums of money received by him to his credit as Treasurer of the said City, we, the said Ed. McCarthy as principal, and D. W. Kempner and Tim Sullivan as sureties, do hereby, covenant with the said City of Galveston, Texas, that the said Ed. McCarthy & Co. will pay interest on all such monies as may be deposited with him at the rate stipulated in his written obligation of even date herewith, and will safely keep and truly account for and pay over any and all sums which may be deposited with him on demand and as ordered by the Board of Commissioners of the City of Galveston.

"And we do jointly and severally bind ourselves, our heirs, executors and administrators, to indemnify and reimburse the said City of Galveston, Texas, for any and all loss, damage, cost or expense which may arise or flow from the failure of the said Ed. McCarthy & Co. to safely keep or to promptly pay on demand and as ordered by the Board of Commissioners of the City of Galveston any funds which may be so deposited with him by the Treasurer of the said City or any interest accrued upon the same.

"In witness whereof we have subscribed our names hereto on this the 29th day of July, 1925.

                        "Ed. McCarthy & Co
                            "By Ed. McCarthy, Principal
                        "D. W. Kempner
                        "Tim Sullivan, Sureties."
                

The city of Galveston also made R. Lee Kempner a party defendant, praying, as against him, judgment upon a bond of like import as the one set out above, which bore date June 2, 1925.

The plaintiff city alleged that the principal of the bonds was Ed. McCarthy, who was doing business under the name of Ed. McCarthy & Co., and that McCarthy has been adjudged and was a bankrupt, and his bank was closed, and for such reason it was not necessary he be made a party defendant.

Complaining of Tim Sullivan, D. W. Kempner, and R. Lee Kempner, the plaintiff substantially alleged that the city of Galveston, by proper resolution, designated Ed. McCarthy's bank as one of the banks in which its treasurer should deposit all sums of money received by him as such treasurer, from all sources of revenue whatsoever; that such resolution provided that the treasurer should not make any deposit in any bank so designated until such bank had entered into an obligation with the board of commissioners of the city to pay the treasurer of the city interest on the average daily balances at the rate of 4 per cent. per annum, and had furnished a good and sufficient bond satisfactory to the board, conditioned that such bank would safely keep and account for and pay over such money on demand and as ordered by the board; that thereafter McCarthy entered into a written obligation with the board whereby he bound himself to accept such funds as might be deposited with him by the city treasurer, and to pay interest thereon at the rate of 4 per cent. per annum at the end of each month, based on the average daily balance and to pay over such moneys on demand and as ordered by the board; that such written obligation bore no date, but as a fact was executed by McCarthy and delivered to and accepted by the board contemporaneously with the bond first executed by McCarthy, of date June 2, 1925, and signed by Tim Sullivan and R. Lee Kempner as sureties; that, after the execution and delivery of such written obligation and bond and prior to August 1, 1925, the treasurer deposited with Ed. McCarthy & Co. various sums of money belonging to the city, which had lawfully come into his hands as such treasurer, and that McCarthy properly and duly accounted for various sums but not all of such sums as had been deposited with him, and that there was a balance of the sums so deposited unpaid and owing by McCarthy to the city on the 1st day of August, 1925; that R. Lee Kempner was, on the 1st day of August, 1925, made treasurer of the city, and thereupon Ed. McCarthy entered into a new bond with the city, which was signed by Ed. McCarthy & Co. as principal and by D. W. Kempner and Tim Sullivan as sureties.

The plaintiff alleged that in the bond of date July 29, 1925, the words "even date herewith" were used by mistake, and that the reference to the "written obligation" mentioned therein was of date June 2, 1925, and it was the intention of the parties to the instrument to state that the instrument attached to the bond was of even date of the bond of date June 2, 1925.

The plaintiff further alleged that Tim Sullivan and R. Lee Kempner, the sureties on the first bond, the one of date June 2, 1925, were liable for all funds deposited by the terms of such bond, and that Tim Sullivan and D. W. Kempner, sureties on the last bond, the one of date July 29, 1925, were liable for all funds deposited after August 1, 1925, and also for the funds in the hands of McCarthy at the time of his failure; that both sets of sureties are liable for parts of the funds so deposited with McCarthy, and that it is difficult to determine when the default complained of actually occurred as a matter of law; that subsequent to the execution of the bond of date June 2, 1925, the treasurer deposited various sums with McCarthy which were credited on the books of McCarthy to the city; that such deposits were carried upon the books of McCarthy in several accounts, one of which was designated as "interest account," as against which only a limited class of vouchers or checks of appellee, drawn upon its treasurer, were to be charged, one as "checking account," into which deposits were carried for the purpose of providing for the payment of the bulk of plaintiff's vouchers or checks against its treasurer, and a third account, designated as the "pay roll account," into which there were transferred from the "checking account" credits against which there were charged, as the same were presented and paid, vouchers of appellee on its treasurer issued to pay the salaries, wages, and compensation of its officials, servants, agents, and employee; that the deposits made and credited in the "interest account" consisted of funds belonging to appellee and lawfully received by its treasurer for its account from various sources as well as funds which were from time to time by the treasurer transferred from funds belonging to plaintiff and under the lawful control of the treasurer in other duly designated depositaries; that the deposits in the "checking account" consisted of funds belonging to appellee and transferred by its treasurer from other depositaries as well as sums transferred on the order of the treasurer from the above-mentioned "interest account" with McCarthy to such "checking account"; that the "pay roll account" consisted entirely of sums appropriated and transferred under the orders of the treasurer from the "checking account" on McCarthy's books to such "pay roll account" on those books, which was done simply for the purpose of establishing a separate account in which certain classes of plaintiff's checks on its treasurer should be charged when paid; that all of the sums evidenced in all of such accounts represented funds belonging to the city and lawfully coming into the custody of its treasurer and by him deposited with McCarthy, doing business under the name of Ed. McCarthy & Co.; that in no instance where a transfer of credits due to the city and its treasurer in its behalf was made upon the books of the bank from one of the above-mentioned accounts to another of them was such transfer intended to be or was it in fact a payment in any manner to the city, nor was it intended to nor did it in fact in any way affect the city's title to the funds evidenced by such credits, but that the result of the transfer was in each instance to evidence in the account to which it was made so much of the indebtedness to the city as was theretofore evidenced in the account from which the transfer had been made. And the credits shown in all of the accounts mentioned evidenced indebtedness to the city from McCarthy because of deposits made with him of funds belonging to the city and lawfully coming into the hands of its treasurer for its account and by the treasurer deposited in the McCarthy bank; that R. Lee Kempner, having duly qualified as treasurer of the city under his appointment above mentioned, received on August 1, 1925, from his predecessor in office, the funds of the city on deposit in its several depositaries; that at that time there was a balance owing to the city from McCarthy in the amount of $184,976, which was evidenced by a balance of $45,136.88 in the "checking account," a balance of $138,038.37 in the "interest account," and a balance of $1,800.50 in the "pay roll account"; that R. Lee Kempner, as treasurer of the city, received on the date just mentioned his predecessor's two checks on Ed. McCarthy & Co., one in the amount of $138,038.37 to cover the above-mentioned balance in the "interest account," and the other in the amount of $45,136.38 to cover the balance in the "checking account"; that those checks...