Taelman v. Board of Finance of School City of South Bend

• Decision Date: 24 February 1937
• Docket Number: 26698.
• Citation: 6 N.E.2d 557,212 Ind. 26
• Parties: TAELMAN et al. v. BOARD OF FINANCE OF SCHOOL CITY OF SOUTH BEND et al.
• Court: Indiana Supreme Court

6 N.E.2d 557

212 Ind. 26

TAELMAN et al. v. BOARD OF FINANCE OF SCHOOL CITY OF SOUTH BEND et al.

No. 26698.

Supreme Court of Indiana

February 24, 1937

Appeal from Superior Court, St. Joseph County; J. Fred bingham judge.

G A. Farabaugh, W. R. Arnold, and Geo. Sands, all of South Bend, for appellants.

Roland Obenchain, of South Bend, for appellees.

FANSLER Judge.

By an act of the Legislature of 1927 (Acts 1927, c. 65, § 1, p 170, Burns' Ann.St.1933, § 28-1437, Baldwin's Ind.St.1934, § 10429), there was created the 'board of finance of library building and ground fund' in cities having a population of not less than 70,000 nor more than 78,000. Ex officio, the president, secretary, and treasurer of the board of trustees of the school city made up the board. The act applied to the city of South Bend only. By that act, authority was given to levy and assess taxes for a fund known as the 'General Public Library Fund,' for use in the maintenance, support, and operation of free public libraries, and it is provided that, pending its use, it shall be deposited in such depository or depositories as may be designated by the board. It is provided that: 'The bank, banks, trust company or trust companies offering the highest rate of interest for the use of the moneys in said fund * * * shall be designated as the depository or depositories of said fund.' It is further provided that, before making any deposit, the board of finance shall require of the depository a bond, 'conditioned upon the faithful accounting to such finance board of all moneys which may come into the possession of such depository or depositories and the performance of their obligations and acts as such depository or depositories.' It is provided that, if the bond shall be personal, it shall be executed by not less than seven freeholders, in an amount not less than double the maximum amount of the funds to be held on deposit at any one time, and that, if it is a surety company bond, it shall be in an amount not less than the maximum amount of funds to be so held at any one time. It is further provided that the finance board shall have full power to require, from time to time, the increase of the amount of any personal bonds. There is also a provision that the commission of the depository may be revoked at any time, and a settlement required.

The finance board of the library building and ground fund of the school city of South Bend, on the 10th day of December, 1928, gave notice that it would receive sealed bids from qualified banks to act as depository of the funds in its hands, which then amounted to approximately $150,000, expressly reciting in the notice that depositories would be designated under the terms of the act referred to, and that the depository selected would be and act as such 'commencing on the first day of January, 1929, for during and until the 31st day of December, 1930.' The Washington State Bank of South Bend submitted a bid for $50,000 of the funds, and offered interest at the rate of 5 per cent. per annum. Its bid was accepted, and it tendered a bond in the penal sum of $160,000, with appellants and cross-appellees as sureties thereon. On January 9, 1929, an initial deposit of $50,548.81 was made. Interest was credited to the account monthly. On June 29, 1929, there was a deposit of $5,095.27. On December 23, 1929, there was a deposit of $4,594.01. On June 30, 1930, there was a deposit of $3,489.46, and on December 30, 1930, a deposit of $3,404.53. The total balance in the Washington State Bank on December 30, 1930, was $72,810.53. On December 8, 1930, the finance board published a notice asking for bids from prospective depositories for a two-year period from January 1, 1931, which notice was in all respects like the one above referred to. The Washington State Bank filed a proposal dated December 31, 1930, in all respects like its former proposal, except that it bid for $75,000, and offered 2 1/2 per cent. per annum interest. This proposal was accepted, and on January 9, 1931, it delivered its bond in the penal sum of $194,000, with appellants, and no others, as sureties thereon, the cross-appellees who had signed the first bond not becoming sureties upon the second bond. On January 5, 1931, interest of $295.70 was credited. There were no further credits to the account. On January 29, 1931, the bank suspended business, the balance credited to the account upon that date being $73,106.23. This action was begun in February, 1932, by the 'Board of Finance of the School City of South Bend,' as plaintiff, against appellants. In December, 1932, an amended complaint was filed, making the cross-appellees additional parties defendant. There was a trial, judgment for the plaintiff against appellants, and in favor of the cross-appellees.

Error is assigned upon the overruling of appellants' motion for a new trial, upon the ground that the decision of the court is not sustained by sufficient evidence and is contrary to law; and cross-errors are assigned upon the overruling of the motion of the appellee board for a new trial as to the defendants and cross-appellees Nimtz and Farabaugh, and upon the overruling of the motion to modify the judgment in respect to defendants Nimtz and Farabaugh.

Appellants contend here, for the first time, that if the bond was given pursuant to the act of 1927, the obligee was a distinct legal entity, the 'Board of Finance of the Library Building & Ground Fund'; that it alone would have a cause of action under the act on the bond; and that, as the 'Board of Finance of the School City of South Bend' is the plaintiff, and no ground is shown by the complaint or the evidence for substitution, the action cannot be maintained by the plaintiff; and that the decision of the court is contrary to law and not sustained by the evidence. By chapter 53 of the acts of 1931 (Acts 1931, p. 122), the appellee board succeeded to all of the powers and duties of the board created by the act of 1927. No question of its right to sue was raised by demurrer or answer. In their stipulation covering the evidence, the parties treat the appellee board as the original contracting party.

The appellee board's right to maintain the action cannot be successfully questioned at this time.

It is contended that at the time the second bond was executed the census of 1930 had been taken, showing an increase in the population of the city of South Bend, which took it out of the classification covered by the act of 1927; that, since the funds in question were no longer governed by the act of 1927, there was no legislation under which depositories could be selected, except the General Depository Act of 1907 (Laws 1907, c. 222), as amended in 1909 (Laws 1909, cc. 77, 129, 176); that therefore the bond is controlled by the terms of that act. But this contention cannot be sustained. The board of finance in charge of the fund was created by the act of 1927, and it is not shown to have accounted to any other board or body for the fund, and it is shown to have continued to exercise dominion over the fund. The advertisement for depository bids expressly declared that bids would be received pursuant to the terms of the act of 1927. The interest rate which the bank agreed to pay was not the same as the rate fixed in the Depository Act. The amount of the bond required and given, which was twice the amount of the maximum deposit contracted for, is different than that provided for by the General Depository Act. The status quo law of 1929 (Acts 1929, c. 81, p. 275), which provided for the continuance of governmental units in the same classification, notwithstanding changes in population, shown by the census of 1930, had been enacted, and had not been declared inoperative. See Crowe v. Board of Com'rs of County of St. Joseph et al. (Ind.Sup.1936) 3 N.E.2d 76. At the time the bond was given, the parties assumed the act of 1927 to be in effect, and they contracted with reference to it. There was at least color of law authorizing this assumption. The bank received the benefits of the contract and still retains them. It cannot therefore be heard to question the validity of the law under which the contract was made in order to escape liability under the contract, and, if it cannot do so, neither can its sureties. The same rule applies to the contention of appellants that the act of 1927 was unconstitutional because it created an illegal classification.

It is also contended by appellants that the second bond, which covers 'all the public money and effects, and each and every part thereof, which may be deposited with or received by said principal,' is prospective in operation, and that, as no moneys came into possession of the bank subsequent to the time of its execution, there is no liability upon the bond. The appellee board of finance contends that the second bond was given as additional security; that it is merely cumulative; and that liability continued upon the first bond; and that the second bond is liable also for all funds on deposit at the time it was given. This is the basis of its contention that the court erred in finding for appellees Nimtz and Farabaugh, who signed the first bond and did not sign the second. The cross-appellees Nimtz and Farabaugh contend that the giving of the second bond discharged the first; that it is a new contract covering the entire obligations of the bank.

Appellants in their brief, make no point, cite no authority, and direct no argument to the question of their liability upon the first bond, except the contention that they were relieved of liability by the Sureties Relief Act of 1933 (Acts 1933, c. 78, p. 488, Burns' Ann.St.1933, § 61-701, Baldwin's Ind.St.1934, § 13845). But this Relief Act is limited by its express terms to bonds given to...