Thurston County, to Use of Vesely v. Chmelka

• Decision Date: 29 November 1940
• Docket Number: 30880.
• Citation: Thurston County, to Use of Vesely v. Chmelka, 294 N.W. 857, 138 Neb. 696 (Neb. 1940)
• Parties: THURSTON COUNTY, TO USE OF VESELY, ET AL. v. CHMELKA ET AL.
• Court: Nebraska Supreme Court

294 N.W. 857

138 Neb. 696

THURSTON COUNTY, TO USE OF VESELY, ET AL. v. CHMELKA ET AL.

No. 30880.

Supreme Court of Nebraska.

November 29, 1940

Syllabus by the Court.

1. When an officer, charged with the custody of public funds, serves successive terms, the sureties upon the bond for the second term become prima facie responsible for such balance of the previous account as is chargeable to their principal, the presumption being that the officer has received in his new official capacity that which it was his duty to pay in his old, and that he has on hand all the funds with which he is chargeable. The burden of proving the contrary is upon the sureties on the second bond.

2. It is the duty of a treasurer to require that payments be made to him in money, or its equivalent evidenced by some medium that is immediately convertible into money However, the fact that he does not require payments to be so made does not ipso facto relieve him or his surety from liability.

3. A transfer of the funds from a treasurer to himself has been made where a treasurer of public funds succeeds himself in office, furnishes the required bond with new sureties, has funds of his office on deposit in a bank, which, although insolvent, continues to do business, receiving deposits and honoring withdrawals, and the treasurer deals with such deposit as funds of his office for the second term, and the bank recognizes his continued authority and control over such funds. If a loss results, the treasurer and his surety for the second term are liable unless it be shown that the loss was complete during the first term. To avoid this liability it is necessary to show that the particular deposit could not and would not have been paid in money upon demand by the treasurer at the beginning of his second term. It is not sufficient for the surety on the bond for the second term to show that the bank was insolvent at the beginning of the second term and that its liabilities were in excess of its assets.

4. A treasurer is bound to pay over to his successor the money remaining in his hands at the conclusion of his term. The succeeding treasurer is bound to require that he be paid in money.

5. The guaranty of the " faithful discharge" of the duties of a treasurer, contained in a bond, is a guaranty not only of personal honesty, but also of competency, skill, and diligence in the discharge of the treasurer's duties.

6. When a public officer gives a bond for the faithful discharge of his duties, the word " faithful" is held to imply that he has assumed that measure of responsibility laid on him by law, had no bond been given; that the object of a bond so conditioned is to get sureties for the performance of the duties of the office according to law, and that everything is unfaithfulness which the law does not excuse.

7. Except as relieved by statute, if a treasurer receives money or its equivalent, he and his surety are accountable therefor as insurers of such funds. If, in lieu of money, he accepts something else, he has failed to discharge faithfully the duties of his office, and he and his surety are responsible for any resulting loss.

8. The obligee of the bond for the second term is not denied a right of recovery for a breach of duty during that term merely because there might have been a different breach of duty by the treasurer during the first term, arising out of the handling of the funds in such a manner that the surety of that term might be liable.

Appeal from District Court, Thurston County; Ryan, Judge.

Action by Thurston County, to Use of Frank Vesely, and others against James Chmelka and others upon a school district treasurer's bond. From judgment dismissing the action, plaintiffs appeal.

Reversed and remanded.

PAINE, J., dissenting.

Zacek & Nicholson, of Wisner, for appellants.

Ginsburg & Ginsburg, of Lincoln, for appellees.

Heard before SIMMONS, C. J., and ROSE, EBERLY, PAINE, CARTER, MESSMORE, and JOHNSEN, JJ.

SIMMONS Chief Justice.

A school district treasurer deposited funds of the district in a state bank operated by the Guaranty Fund Commission; the bank honored all withdrawals during the first term, and a balance remained on hand payable to the treasurer at the end of his first term. At that time the bank was probably insolvent, but had sufficient cash reserves to pay the treasurer's deposit had it been demanded. The treasurer succeeded himself in office, furnished the required bond, with different sureties, entered upon the duties of his office for the second term, did not require the payment to himself of the moneys on deposit, treated the deposits as money at the beginning of and during his second term, added deposits thereto, issued checks against the same, and generally exercised dominion and control over the deposit. The bank during the period of the second term was adjudged insolvent and was closed, and money was lost to the treasurer and the district. The question is presented: Are the treasurer and his surety for the second term liable for the loss? The conclusion is that they are liable.

This action was before this court in Thurston County v. Chmelka, 135 Neb. 342, 281 N.W. 628.The issues remain the same. Upon the second trial evidence was presented which materially changes the factual situation. The issues material here are that Chmelka, as treasurer of the school district, succeeded himself in that office in July, 1927, and that on July 16, 1927, he, with the defendant Jasa as one of his sureties, delivered his bond, which was duly approved. The bond was filed July 27, 1927, with the county clerk. The condition of the bond is that Chmelka " shall faithfully discharge the duties of his office * * * and shall well and truly pay over to the person or persons entitled thereto, upon the proper order therefor, all sums of money which shall come into his hands as treasurer of said district, and shall, at the expiration of his term of office, pay over to his successor in office all moneys remaining in his hands as treasurer." Plaintiffs allege that during said term Chmelka " deposited or permitted to remain on deposit in the Liberty State Bank of Thurston, Nebraska," certain of the funds of the district; that on March 10, 1928, the bank was adjudged insolvent; that at that time Chmelka had on deposit in said bank funds of the district in the sum of $1,500; that the said amount could not be withdrawn or obtained; that Chmelka is in default " as to the funds with which he was chargeable" and liable therefor. Defendants admit the official status of Chmelka, the execution and delivery of the bond, and deny generally other allegations. The cause was tried to the court, a jury being waived. At the conclusion of the trial, the court made findings of fact and law and dismissed the action.

Plaintiff contends that the defense offered is one of confession and avoidance and is not available under the general denial. We pass that contention and decide the principle question involved: Are the defendants Chmelka and Jasa, his surety, liable on the bond here in suit for the loss to the district? That the district lost its funds is not denied.

There is little dispute as to the material facts. The dispute arises as to the conclusions to be drawn from the evi dence and as to the liability of the defendants. The Liberty State Bank (hereinafter called the bank) was taken over by the Guaranty Fund Commission of the state on September 30, 1925, and thereafter operated by the Commission as a " going concern." The expectation was " that the guaranty fund would eventually pay off the depositors." For cases dealing with this general situation, see Svoboda v. Snyder State Bank, 117 Neb. 431, 220 N.W. 566, and Morrill County v. Bliss, 125 Neb. 97, 249 N.W. 98, 89 A.L.R. 932.The situation did not develop as was hoped. Beginning sometime during June or July, 1927, the commission, as to all banks under its control, required that withdrawals of deposits be regulated " in accordance with their reserve," and, where necessary, individuals be favored over public bodies in withdrawals. The bank involved here continued to take deposits until August, 1927. Just when it stopped withdrawals generally is not clear. It was adjudged insolvent, and a receiver placed in charge March 10, 1928.

The defendant Chmelka was elected treasurer of the school district in July, 1926. He furnished the required bond and entered upon his duties. He deposited the funds of the district in the bank, and all checks thereon during his first term were honored and paid by the bank without question. During the month of June, 1927, fourteen checks, totaling $429.95, were drawn against the account and paid by the bank. During the months of January to April, 1927, the district borrowed from the bank the sum of $3,200, and on June 7 1927, the district paid the bank the sum of $3,255.70. At the end of the defendant's first term, $1,588.09 remained on deposit in the bank. The first term ended about the middle of July, 1927 (exact date not shown). The bond in question was entered into and delivered July 16, 1927. By stipulation it is agreed that Exhibit " A" is one of the records kept by Chmelka " during his term of office commencing July, 1927." This exhibit shows an entry dated July 16, 1927. It may, therefore, be determined that Chmelka's second term of office began on or before the 16th day of July, 1927. His treasurer's record (Exhibit " A" ) shows that on July 16, 1927, he received from the bank " balance from last year $1,588.09." Actually on that date he did not receive any transfer of funds, and did not take any specific action as to this deposit. He testified that that amount was " chargeable" to him when he entered upon his second term, as a " balance on hand; " that he "...