Union School Township v. First National Bank of Crawfordsville
| Decision Date | 15 September 1885 |
| Docket Number | 10,288 |
| Parties | Union School Township v. First National Bank of Crawfordsville |
| Court | Indiana Supreme Court |
Original Opinion of January 27, 1885, Reported at: 102 Ind 464.
We have again given the questions in this case careful consideration and the result is that we are strengthened in the conviction that our conclusions heretofore announced were right.
We are clear that the trustee of a school corporation is a special agent of very limited authority. Not only is he a special agent, but he is also one whose authority is only such as a public statute confers upon him. This our decisions have often affirmed, as appears from the cases cited in our former opinion. That this conclusion is a just one can not be doubted by one who considers the nature of a school corporation and the character of the authority of its agent the trustee. The corporation is itself organized for a limited and local purpose. it is not a corporation with general powers; it has neither the general power to contract debts nor to buy property. Its power is to conduct the local school affairs, and to do this with the money derived from the revenues set apart for school purposes. There is, in strictness, no power in the corporation to obtain or to expend money derived from any other source than the school revenues. Wallis v. Johnson School Tp., 75 Ind. 368. Thus is the power of the corporation itself circumscribed, and its agent, the trustee, can by no possibility possess authority that is not possessed by his principal. It is perfectly obvious, therefore, that one who deals with a school trustee must, at his peril, ascertain that the trustee is acting within his authority. It is incumbent upon a person seeking to hold the corporation liable for a debt created by the trustee in the name of the corporation, to affirmatively show that it was one he had authority to incur. In this case this essential fact does not appear; for we think it too clear for argument, that where the trustee has funds of the corporation in his hands, he can not plunge it into debt. It is his duty, and his duty bounds and limits his authority, to apply the money of the corporation to payment for articles purchased for the corporation, and not to go into bank and borrow money in the name of the corporation. This the bank was bound to know, and it could not avoid knowing that at the time it lent money on the notes signed by its depositor as school trustee, he had school funds in his hands, for this information public records and the law made known. It was its duty to know that there were no school funds in his hands before it advanced him money. It follows from what we have said that, conceding that the money furnished Robinson was put in his hands by the bank to pay claims against the school township, still there can be no recovery; but this is a concession not justified, for the money was placed directly to the credit of Robinson as an individual, and was so drawn from the bank by him. The money, therefore, was paid to Robinson directly, and went to his benefit as a depositor of the bank.
It needs no argument to prove that the school corporation, with no power to obtain money except from the public revenues set apart for that purpose, ought not to be charged with interest on money borrowed by its special agent when he has funds of the corporation in his hands supplied from the proper source. The law contemplates no such procedure. It is his duty to disburse the funds entrusted to him, and not to impose the burden of a debt upon the corporation.
It is true, that we have held that where the money received on notes executed in the name of the school corporation goes to pay for property received by it, the person advancing the money will be subrogated to the claim of the person who actually furnished the property, but we have steadily held that it is only in cases where the school corporation actually received the property purchased, that subrogation can take place. It is well known that subrogation arises, not by contract, but by force of equitable principles, and only in cases where good conscience requires that it should take place in order to prevent injustice. In this instance there is an entire absence of equity in the plaintiff. It can not be claimed with any tincture of reason, that the creditor of a special agent, with restricted and plainly defined statutory powers, can have an equity against a principal who has placed money in the hands of such an agent to pay all claims.
The evidence does tend to show, as claimed by counsel, that Robinson had no public money to his credit on the books of the bank, but this is very far from showing that he was not provided with funds from the public revenues. The question is not what money he had in bank, but what money of...
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