State Ex Rel. Adair Co. Com'rs v. McCloud , 64 Okla. 126 ( 1916 )

The opinion of the court in this case was written by Commissioner BURFORD, and was filed December 12, 1916. The syllabus reads:

"The bondsmen of a county treasurer, who, in good faith and without notice of any lack of responsibility in the bank, or defect in the bond, deposits his official funds in a duly designated county depository, which has given a bond legally approved and accepted, and which is, by its terms, in force during the period of such deposit, are not liable for loss of funds occasioned by the failure of the depository, and a subsequent adjudication that the surety on the bond was not liable thereon by reason of lack of authority of the person signing such surety's name to the bond, to bind such surety.

"No such exemption from liability is given the county treasurer by statute, and he is liable for the full amount of such loss.

"If a county treasurer deposits in a depository more than the amount of its bond, legally approved and on file, he and his bondsmen are liable for such excess amount lost by the failure of the bank."

Counsel for plaintiffs in error in due time filed petition for rehearing, in which it is contended that the findings of the trial court and of this court are clearly against the weight of the evidence. It would serve no useful purpose to review this evidence, but we have carefully examined the record, and are of the opinion that the facts as found by the trial court are amply supported by the evidence, and, as stated by the Commissioner, there being evidence reasonably tending to support the findings of the trial court, we are bound by such findings.

While we adhere to the opinion of the Commissioner in this respect, our investigation of the authorities and further consideration of the case convinces us that the opinion is incorrect to the extent that it holds that the treasurer is liable for loss of funds occasioned by the failure of a depository bank, where such bank was designated by the board of county commissioners as one of the county depositories, and had given a bond legally approved and accepted, which by its terms was in full force during the period covering such deposits, and such deposits were not in excess of the amount of the bond so taken and approved. On this question the learned Commissioner in the course of the opinion, says:

"The statute says that the county commissioners shall take a bond, and that, the bond being taken, conditioned as provided in the statute, the bondsmen of the treasurer shall not be liable for the deposit. The county treasurer has nothing to do with taking or approving the bond. The fair conclusion is that, where a bond is taken and approved by the county commissioners, and the treasurer, acting in good faith and without negligence, deposits in the depository giving such bond an account not in excess thereof, his bondsmen are not liable for the loss of such deposit by reason of the failure of the bank, and a latent defect in the bond, such as the one in the case at bar. It seems even a harsh rule to hold the treasurer liable under such circumstances, especially in view of the fact that he is required to use the duly designated and bonded depositories; but such seems the logical effect of the decisions and legislative acts, and it must be taken that this is a burden which he voluntarily assumes with the office."

The courts have adopted two general rules in construing official bonds; one rule being that the officer is in the relation of a bailee for hire and is only required to exercise good faith and reasonable skill and diligence in the care and protection of funds intrusted to him. The other rule announced is based upon the strict letter of the bond, and no exemptions are allowed, except those expressly stated in the bond. Under the latter rule it has frequently been held that, where money is lost, destroyed, or stolen without any fault or negligence upon the part of the officer, said officer and his sureties are not released from liability on the official bond given by the officer. This rule was announced in the early case of H. E. Van Trees et al. v. Territory of Oklahoma, 7 Okla. 353,54 P. 495, wherein it was held that the failure of a bank in which funds of the county treasurer were lost without negligence or fault on the part of the treasurer did not relieve the treasurer and his sureties upon the treasurer's official bond for failure to account for the funds deposited in said bank and lost by virtue of its failure. That case was decided long before the county depository law was passed, and the failed bank in that case was selected as a depository by the treasurer himself, and no bond was executed by the bank to the county for the protection of said deposits.

From our investigation of the reported cases we are unable to find a single one holding a treasurer liable on his official bond in cases similar to the one at bar, where, under acts providing for county depositories requiring the treasurer to deposit funds coming into his hands in designated banks, upon said banks executing and the county board taking and approving said bonds as required by law, but we have found several well-considered cases holding that the treasurer is not liable under such circumstances.

Stephens v. City of Ludlow et al. is a Kentucky case, reported in 159 Ky. 729, 169 S.W. 473, wherein one Stephens, as treasurer of the city of Ludlow, instituted a suit praying for an injunction against the members of the city council of said city to restrain them from interfering with him in the disposition of the funds in his hands as treasurer of said city, and also to restrain them from putting into effect an ordinance requiring him and all other city officers having control of the custody of the money belonging to the city of Ludlow to deposit said money in the bank designated under the terms of the ordinance. It was contended by Stephens that, since he was liable in any event on his bond for all funds coming into his hands, the city was not authorized to pass the ordinance, and that it could not require him to deposit funds coming into his hands as treasurer in the bank designated by the city, but that he had a right to select the depository in which the funds were to be kept. The law of Kentucky pertaining to the duties of the treasurers of such cities provided that it should be the duty of the treasurer "to receive and safely keep all money belonging to the city," and "perform such other duties as may be required of him by ordinance not inconsistent with this act." In disposing of the treasurer's contentions the Court of Appeals of Kentucky, in an opinion by Carroll, Judge, said:

"This general direction that the treasurer shall safely keep all moneys belonging to the city and faithfully account for the same is not taken away by the ordinance giving the council the right to select a depository. The ordinance does not undertake to interfere with the right of the treasurer to safely keep and account for the funds that come into his hands. It merely directs him in what depository the funds shall he kept. No one of the other duties imposed upon the treasurer by the statute is touched by this ordinance. The power and duty of the treasurer, under the ordinance, is the same as it was before its enactment, except that the city funds must be placed and kept in the depository selected by the city. It is argued that, as the treasurer is bound at all hazards for the safekeeping of the funds, he, and not the city, should have the right to select the depository in which they should be kept There would, of course, be great force in this argument, if the treasurer were an insurer of the solvency of the depository selected by the city; but he is not. If the treasurer himself selected a depository, and the funds of the city were lost by any wrongdoing on the part of any of its officers, or from other causes, the treasurer would be liable to the city for the funds, although he might have exercised the highest degree of care in selecting the depository. When, however, the selection of the depository is taken out of his hands, and he is directed by the city to keep its fund in an institution selected by it, the city, and not the treasurer, assumes responsibility for the integrity and solvency of the institution so urer, which, under the Constitution, the Leg435, 17 S.W. 737."

It will be noted from the above language that the court recognized the rule that the treasurer would have been liable for the loss of funds in the event he had selected the depository, even though such funds were lost without any fault or negligence on his part, and based its holding upon the solid ground:

"That when the selection of the depository is taken out of his hands, and he is directed by the city to keep its funds in an institution selected by it, the city, and not the treasurer, assumes responsibility for the integrity and solvency of the institution so selected."

In 1910, the Mississippi Legislature passed an act providing for the establishment of county and drainage district depositories, and requiring the county treasurer to deposit certain county moneys therein. Prior to the passage of this act it appears that the courts of that state had followed the rule that the county treasurers were insurers of the safety of the funds coming into their possession by virtue of their offices. One Magee, the county treasurer of one of the counties of Mississippi, brought an action in the courts of that state wherein he contended that the statute just mentioned was unconstitutional on the grounds, first, "that it practically abolishes the office of county treasurer, which, under the Constitution, the Legislature was without power to do"; and, second, "because it makes the treasurer an absolute insurer of, and holds him absolutely liable for, the moneys of the county, when all control over same is taken out of his hands and vested in the county depository." The Supreme Court of Mississippi overruled these contentions, upheld the validity of the statute, and in disposing of the second objection made by the treasurer, stated:

"With reference to the second objection, it will be sufficient to say that the county depository law has materially changed the responsibility of the county treasurers for the safekeeping of the county funds, and they cannot now be held as insurers of the safety of the funds deposited by them under the provisions of this law."

The case is styled Magee v. Brister et al., and is reported in 109 Miss. 183, 68 So. 77.

The case of Hamilton County v. Aurora National Bank,88 Neb. 280, 129 N.W. 267, is a Nebraska case involving the county depository law. The Supreme Court of that state, in construing that act, declared the purpose of the law to be:

"To provide a place for the safekeeping of public money, to obtain interest thereon where it was possible to do so, and to relieve state and county treasurers from liability as insurers of so much of the public money as should be placed in depository banks."

Section 1540 of our depository act, Rev. Laws of Oklahoma, 1910, expressly provides that the bondsmen of the treasurer shall not be liable for the deposit in such depository banks, and for the reason that the treasurer was not exempted specifically by said act the Commissioner was of the opinion that he should be held liable, because the rule of strict accountability had been adopted in Oklahoma prior to the passage of the depository act. It is our opinion that the omission to name the treasurer is immaterial and was doubtless an oversight by the Legislature.

From the foregoing authorities it appears that in states where the rule of strict accountability had been applied, as in this state prior to the passage of the depository act, and where the depository law did not specifically exempt the treasurer or his boldsmen, it has been consistently and uniformly held by the courts, in construing said depository act, that neither the treasurer nor his bondsmen are liable. We have no doubt that the purpose of the Legislature of this state in requiring the bank designated by the board of county commissioners to execute a bond was for the protection of such funds, and it would be unjust to hold the treasurer liable when he had no voice in the selection of the depository, but was required to deposit the funds in the depository named by the fiscal agents of the county. This question has also been before this court, and the original opinion filed in this cause, holding the treasurer liable, is in conflict with a previous decision of this court in the case of Hinton et al. v. State ex rel. Neal, County Attorney, 57 Okla. 777, 156 P. 161. In that case we held, in an opinion by Commissioner Robberts, that the treasurer and his bondsmen were not liable for funds deposited in the depository bank within the amount of the bond taken and approved by the county board, but were liable for all such funds deposited in excess-of the amount of the bond given by the depository bank. It was there said:

"It is well settled by authority and on principle that, when such depositories have been designated according to law, neither the county treasurer nor his bondsmen are liable for the loss of funds deposited therein, so long as the treasurer keeps within the requirements of the law. In line with that proposition, it is evident that the defendants in this cause would not be liable for the funds deposited up to the amount of the bond, which was $8,000."

It follows that the opinion filed in this cause on December 12, 1916, should be modified in accordance with the views herein expressed, and the judgment of the trial court affirmed.

All the Justices concur, except KANE, J., absent.