Commonwealth v. Tate

13 S.W. 113, 89 Ky. 587, 1890 Ky. LEXIS 29

• Court: Court of Appeals of Kentucky
• Decided: February 27, 1890
• Status: Published

Opinion

JUDGE BENNETT

delivered the opinion of the court.

James W. Tate, on the first Monday in August, 1867, was elected Treasurer of the appellant for the term of two years, beginning on the first Monday in January, 1868. He was elected biennially thereafter until the first-Monday in August, 1887, at which time he was again elected for the term'of two years, and held the office until the 20th of March, 1888, at which time the Governor and Secretary of State suspended him from the duties of his office, and in a few days thereafter the Legislature impeached him, and he was removed from office.

The appellant seeks by this action to recover of the appellees, the sureties of ‘said Tate on his official bond for the term of 1882 and 1883, the sum of sixty-three thousand nine hundred and forty-eight dollars and ninety-one cents, the alleged official defalcation of' said Tate during said term.

The appellees, as the sureties aforesaid, denied that Tate committed any act of defalcation during said term; alleged that he had committed defalcations for large amounts during his preceding terms,' which, by means of false entries, were carried into the term of 1882 and 1883 as so much cash on hand; but, in fact, the sum apparently carried forward into said term as so much cash on hand was not cash, but represented said Tate’s previous defalcations, and the appellees were not bound on said bond for the same. They •also plead that Tate, as Treasurer, could receive no public money, and did receive none, except by the written permit of the Auditor, and could pay out no public money, and did not pay out any, except upon the warrant of the Auditor; and as the Auditor was required to settle with, him once a month, and the Auditor and Secretary of State were required to make biennial settlements of his accounts, &c., it was impossible for him to make any defalcation and not be detected in the fact by the Auditor, or the Auditor .and Secretary of State, unless these officers were derelict in their duty; that said duties of these officers .entered into the contract with the appellees as the sureties of said Tate, and became a part of it; and as the Auditor had monthly settlements with Tate ■during the years 1882 and 1883, and the Auditor and .Secretary of State made a biennial settlement of his accounts, &c., for those years on the 7th day of January, 1884, and reported his accounts with the appellant as all right; and the appellees, in good faith, relying on the same as correct, and, therefore, taking-no steps to indemnify themselves against the alleged, defalcation; and if there was such defalcation, the •same could not have happened or remained undiscovered, except by the negligence of the Auditor and Secretary of State; and as a faithful discharge of their duties in this regard formed a part of the contract with the appellees, and as their neglect to perform them would cause a loss to fall on the appellees which would not have fallen upon them had these ■officials diligently and efficiently discharged these duties, they, the appellees, are released. They also allege that said Auditor and Secretary had, previously to 1882 and 1883, reported monthly and bi■ennially that said Tate had kept faith with the State, .•and his official dealing with it as Treasurer was corgect; and as it was upon the faith of the truth of these statements that they signed said Tate’s bond as sureties, and as it was upon the faith of these •monthly and biennial statements relative to the term of 1882 and 1883 that caused the appellees to rést under the belief that Tate was not in default, and to take no steps for their indemnity, the appellant is. estopped to proceed against them.

The bond, executed by Tate and the appellees for the term of 1882 and 1883, is as follows:

“Whereas, James W. Tate, of the county of Franklin, was, at the general election, held the first Monday in August, A. D., one thousand eight hundred and eighty-one, duly elected Treasurer of the State of Kentucky. Now we, James W. Tate, principal, and the other subscribers hereto as his sureties in this official bond of said Tate, do hereby bind ourselves jointly and severally to the Commonwealth of Kentucky that the said James W. Tate, as Treasurer-aforesaid, shall faithfully and diligently discharge all the duties appertaining to said office. In witness whereof, the said James W. Tate and the other subscribers hereto, as his sureties, have set their respective hands,” &c.

The Treasurer’s duties are, among others, “to receive and safely keep in the Treasury all money due or payable to the Commonwealth from collectors of revenue, public officers' and others, when tendered, accompanied by the permit of the Auditor of Public Accounts, stating the amount to be received, on what account, and from whom to be received. He shall immediately make out a receipt for the amount received, and for what, and of whom received, and deliver it to the Auditor, who shall, in like manner, give a receipt to the officer or person paying the same. The receipt, besides stating the amount paid, shall also, if it be all that is due from the officer or person, so state.” (Section 9, chapter 108, General Statutes.)

“The Treasurer shall not receive into nor pay out any money from the Treasury, except upon the certificate or warrant of the Auditor.” (Section 7, chapter 108, General Statutes.)

“If the Treasurer willfully misapply any of the public money, or shall loan or use the same for his own purposes or for the uses or purposes of another, he shall be guilty of felony,” &c. (Section 10, chapter 108, General Statutes.)

According to these statutes, it was the duty of the Treasurer to receive and safely keep in the Treasury all public money tendered, upon the permit of the Auditor, and to pay the same out only upon the warrants of the Auditor, specifying the a mount to be paid, to whom, and for what. It was his duty to safely keep said money, unless paid out as aforesaid ; and to appropriate the same to his own use, or that of another, &c., was a plain violation of his official duty — a breach of official trust, for -which his sureties, by the express terms of the bond, were liable. There are no conditions or provisos in or attached to this bond whatever. The bond is a plain, unqualified and unconditional undertaking on the part of the appellees, as the sureties of Tate, to be responsible for the faithful and diligent discharge of all the duties appertaining to the office of Treasurer, and to answer in damages for any failure of Ms to discharge any of said duties; and, as we have seen, one of said, duties was, not to use or appropriate, for his own benefit, or that of another, any cf' the public money intrusted to his safe-keeping, except to pay the same out upon the warrant of the Auditor. But did the failure of the Auditor to do his duty, whereby the Treasurer was able to appropriate the State’s money to his own use, and conceal the fact, and receive from the Auditor monthly and from the Auditor and Secretary of State biennial statements that Ms official duties, in regard to the State’s money, were honestly and correctly discharged, release the sureties from ■their obligation to pay to the State the amount of Tate’s defalcation? In other words, did the Auditor’s and Secretary’s duty impliedly form a part of the contract with said sureties, or estop the State, so far as. the sureties were concerned, from contradicting said settlements?

It is contended that Tate could not have stolen from the Treasury, and have escaped the detection of the Auditor and the Secretary of State, had the first-named made proper and efficient monthly settlements, .and the two together biennial settlements with him. Rather, he could not have stolen from the Treasury, except after the last monthly settlement and before the next, without the theft, at said next settlement, being detected, if the Auditor had performed his official duty in that regard; and the theft, however often committed, would be discovered, beyond a peradventure, at the next biennial settlement, if the Auditor and Secretary of State had performed their official ■ duty.

The Treasurer could receive no money due the State, except by the permit of the Auditor, stating the amount to be received, on what account, and from whom received. It is the Treasurer’s duty to immediately receipt the Auditor for the same, stating the amount received, for what, and from whom received; and the Auditor, in like manner, receipts to the officer or person paying the same. Each transaction of this sort is entered in detail in the official books of each officer, and the permits and receipts are preserved by each.

The Treasurer can pay no money out of the Treasury, except upon the warrant of the Auditor, specifying the amount, to whom, and for what, which amount, to whom, and for what, he must enter in his books. His books must show, in full and in detail, the respective amounts paid into the Treasury, when, by whom, and for what. They must also show to whom warrants have been issued, when, and for what amount, and that the same has been receipted for by the Treasurer. Also, the Treasurer must report once per week to the Auditor all payments at the Treasury, and the warrants upon which the same were made. (Section 3, article 2, chapter 108, General Statutes.) Also, the “Auditor and Treasurer shall, once in each month, make a settlement of the receipts and disbursements of the money at the Treasury of every description, under appropriate heads, and file the same with the Secretary of State, whose duty it shall be to report them to the General Assembly within the first ten days of each regular session; and the Auditor shall, once in each month, ascertain whether the money on hand in the Treasury agrees with the books of the Treasurer. The result of such investigation he shall immediately report to the Governor.” (Section 4, article 2, chapter 6, General Statutes.)

“Upon the expiration of his term or resignation of his office, or death, the Secretary of State and Auditor shall examine his accounts, state the same, count the money in the Treasury, take an inventory of the property, &c., of his office, and take a receipt for same from his successor in office.” (Section 4, article 1, chapter 108, General Statutes.)

It will be seen that it was the duty of the Auditor to give permits for the receipt of all public money by the Treasurer, and he could lawfully receive no public money without said permit; and if he had received it without such permit, the Auditor, whose duty it was to look after the payment of such money, would, if he did his duty, soon discover the fact; and it was the duty of the Auditor to issue all warrants for the payment of the public money, and the Treasurer could make no payment of the same without such warrants. Said warrants should state the amount to be paid, to whom paid, and on what account, and the Auditor should make corresponding entries of these matters on his books. It was also the duty of the Treasurer to make weekly reports to the Auditor of all payments at the Treasury, and the warrants upon which the same were ma,de, &c. From these reports the Auditor could and should see whether or not the payments were made in accordance with his warrants, an accurate account of which was in his office, and from which lie could tell how much money ought to be on hand. Also, it was the duty of the Auditor to make monthly settlements with the Treasurer of the receipts ..and disbursements of the money in the Treasury of every description, &c. The Auditor could and should .ascertain from his own books how much money the Treasurer had 'received during the month, and how much he had been authorized to pay out; and it was his duty to ascertain whether the money on hand in the Treasury agreed with the books of the Treasurer, &c. As before said, he could tell whether the books of the Treasurer truly showed the amount of money that had been received and the amount authorized to be paid out, and by making a deduction of any outstanding checks that had been issued by the Treasurer on his warrants, he could tell whether the money on hand agreed with the Treasurer’s books. Merely settling by comparing the balance sheets of the Auditor’s .and Treasurer’s books, and thereby ascertaining the respective amounts of the. receipts and expenditures, was not a compliance with the statute supra. Under such practices the Treasurer could steal for two years, which the statute supra was designed to prevent. Also, in the biennial settlement of the Treasurer’s accounts, as required by section 4, article 1, chapter 108, General Statutes, the Auditor’s books, if correctly and truly kept, would show the amount of money, and by whom paid, that went into the Treasury during said term, and the amount of disbursenents, and to whom, during said term. Also, he could, without involving .an unreasonable task, count the money in the Treasury, and ascertain whether the same was correct, or, if the same was in the banks used as depositories, personally apply to them for the correct amounts.

If some of the public debtors had paid .by checks-drawn on some one of the banks of the State, and the same had not been collected, the Auditor’s books-would show that permits had been granted for these amounts, and the exhibition of the checks themselves would show that they had not been collected; or, if they had been forwarded by any one of the three banks used by the Treasurer as State depositories, and had or had not been collected, the same could be ascertained at such bank; or, if the Treasurer had exhibited a list of checks drawn in favor of any creditors; of the- State on any one of said banks, the Auditor; by simply comparing them with the corresponding-warrants and receipts, could tell whether they were authorized, and the actual amount of money in the-Treasury or banks would show how many of these-checks had been paid to the creditors, and how much money had been received on the checks given to them-by the State’s debtors. The law requires these duties-of said officers in making their monthly and biennial settlements of the Treasurer’s accounts, &c., in order to additionally secure the safety of the public money, and to speedily and certainly detect and expose any theft of it by the Treasurer.

On the 7th of January, 1884, the biennial settlement of the Treasurer’s accounts was made as of the 31st of December next preceding. Between the 31st of December and the 7th of January the Treasurer, upon-the permits of the Auditor, had received about seventy-five thousand dollars. It seems that the Treasurer took a sufficiency of this sum to make Ms books correspond with the Auditor’s down to the 31st of December, and then entered the amounts making up the seventy-five thousand dollars as of the proper dates in the month of January; thereby the books down to December the 31st were made to balance, and the January statement was made to appear all right. Why did not the Auditor and Secretary detect this fraud ? The Auditor says it was because he did not consult -his books in reference to said matter on the occasion of said settlement; that said settlement was made by the Treasurer’s books alone. This, the Auditor says, was “not excusable, of course.” He also states that the Treasurer’s accounts at the banks were not personally examined, but that the Treasurer’s entries, and evidences of the same, were relied on in ascertaining the amount of the public money therein.

We have been thus particular to state the Auditor’s and Secretary’s duties, and their alleged omissions of duties, without meaning to cast any personal reflections on either of them; but the statements are made in view of the fact that the appellees rely upon these supposed omissions as a breach of contract on the part of the State, or as an estoppel whereby the appellees are released from liability on said bond, which propositions we will proceed to discuss.

The appellees went the sureties of Tate that he would faithfully and diligently discharge all the duties of his office. There were no conditions or provisos attached to this undertaking. If he could not have stolen except by the Auditor’s connivance — a fact not decided to exist — or negligence, and he was thus enabled to steal, it was, nevertheless, a breach of faith on his part, for which his sureties are liable. The lawmakers attempted to hedge him in with safeguards, so that he could not steal without the theft being almost immediately discovered, and him deprived of his office, if the officer or officers whose duty it was to look after him did their duty; nevertheless, he was required to give bond, with sureties, in a large sum that he would faithfully discharge his duties. Also, the Auditor was not the trusted supervisor of the Treasurer; for he too was required to give bond for the faithful discharge of his duties. The fact that this officer might be negligent did not license Tate to steal. It, nevertheless, was his duty to be faithful and diligent, and the appellees covenanted that he would be. If it were true that the Auditor’s negligence made it imperative on Tate to steal, it might be, then, justly said that the appellees ought to be released. But the Auditor’s negligence did not have this effect. It was the duty of Tate not to steal, notwithstanding the Auditor’s and Secretary’s negligence, &c., and the appellees covenanted that they would be responsible if he did. It was not the Auditor’s and Secretary’s faithful discharge of duty that was to guarantee that Tate would faithfully and diligently discharge his ; but the appellees covenanted that they would guarantee that fact, and be responsible for his failure.

The Commonwealth, in investing the Auditor and Secretary of State with the powers above-mentioned, did not do so as a guaranty to the sureties of Tate that, he would faithfully discharge his duties. If such had been the purpose, there would have been no need of Tate’s giving security for the faithful discharge of his duties; but the power was given to them as an additional guaranty to the people. Hence, the law required Tate to give bond,' with sufficient sureties, that he would faithfully and diligently discharge his duties; and, not being satisfied with this security alone, additional safeguards were thrown around his official conduct in the way of preventing his stealing, and speedily detecting the same, as additional security to the people; and, as still an additional security to the people, bond, with sufficient sureties, was required of the Auditor that he would faithfully and diligently discharge his duties. We concede that these duties were mandatory upon the Auditor; but it does not follow that Tate’s sureties are not also responsible, for both bonds were required as independent securities to the people. It was supposed that the Auditor might be faithless, negligent, or particeps criminis with the Treasurer, consequently he was required to give bond for the faithful discharge of his duties. Hence, it can not be said that he was the trusted agent of the State any more than was Tate. Each gave bond for the faithful and diligent ■ discharge of his duties. Each covenanted to be faithful and diligent, independently of the action of the other. The State required this covenant. The fact tliat the Auditor or the Secretary was particeps criminis, even if such were the case, or was negligent, made Tate none the less a criminal, and his sureties none the less responsible for his defalcation. Tate was expressly informed by the statute that he must not obey the Auditor in the exercise of unlawful authority, if he attempted it. Each bound himself that-he would do his duty, independently of the conduct of the other. The law required this as independent and additional security to the people. The following language, in Taylor v. The Bank of Kentucky, 2 J. J. M., 569, is, as far as the principle is. concerned, applicable here: “Suppose these several agents combine to defraud their principal, is the one-excused by the fact that the other is particeps? Is the surety of one exonerated, because the other has co-operated in the malfeasance ? Or, suppose one connive at the fraud or improper conduct of the other, is the employer responsible because one of its agents, knew of the delinquency, and might have prevented its recurrence ? If A employ an agent to transact particular business, and exact from him security for his fidelity, and constitute another agent to perform other-associate and supervisory functions, surely, if they both conspire to defraud their constituent, the security shall not be permitted to say that the act of the-agent is that of the principal.”- It is clear, from what has been said, that the duties of the Auditor- and Secretary did not form a part of the contract' with Tate’s sureties; nor did their conduct estop the-State from proceeding against the sureties.

The pleadings concede that Tate was a defaulter prior to 1882; but it is denied that he committed any acts of defalcation in 1882 and 1883. It is alleged that he carried these prior defalcations over, and was. charged with the amount of them in his biennial settlement of the first Monday of January, 1882, which: went to make up the five hundred and twelve thou*sand dollars, or the four hundred and eighty-two thousand dohars, supposed to be on hand, as cash, at that time. It is also aEeged that the appellees are not responsible for the same. It was the duty of Tate to safely keep the public money in the Treasury, and not to apply the same to his own use, or to that of another, unless authorized by the warrant of the Auditor, and any such application would be an unlawful conversion, for which the sureties on the bond for that term would be Eable, and he could not thus carry an account with the State over to the next term, and make his sureties of that term Eable for it. The conversion occurred at the moment of the appropriation, and eo instanii the sureties on his existing bond became liable for it, and to make his sureties on a subsequent bond liable for it would be to make them liable for money not on hand at the time they became bound as sureties, nor that came to hand during said term.

After the appellant had concluded its evidence, the court instructed the jury to find for .the appellees. This they did.

The record states that it contains all the evidence introduced or offered by the appellant. This statement complies with the law. But the record shows that the Auditor’s books, Treasurer’s books, the bankbooks, Tate’s reports to the Legislature, his stubs and pass-books, were all considered as read to the jury. The pass-books, however, were rejected as evidence. These books, &c., are not before the court, and the ¡appellees contend that we must presume that they (Contained evidence that authorized the court to give said peremptory instruction. As said, it was admitted that Tate had committed defalcations, and the question was, whether or not he had committed them during his term of 1882 and 1883. It is sufficient to say that the evidence tended to show that a part of the defalcations was committed during said term. It has been held by this court time and again that if the plaintiff’s evidence tends to make out his side of the issue, in whole or in part, it is the duty of the court not to take the case from the jury, but to let them pass upon the issue, although the court might be of the opinion that if there was a verdict for the plaintiff, it should be set aside. Also, in such case the issue should be submitted to the jury, although, in the opinion of the court, the evidence on the other side was overwhelming. The jury have the exclusive right to weigh and pass upon the evidence, and for the court to take the case from them because, in its opinion, the evidence on the one side overwhelms that on the other, would usurp the prerogative of the jury. We may presume that the books and other papers referred to would show all that is claimed; nevertheless, the appellant had evidence before the jury that tended to support its side of the issue, and contradictory of the books, &c.; and it was entitled to have the jury pass upon this conflict of evidence, although its evidence was weak and insignificant as compared with that which the books showed for the appellees. Had the jury passed upon the issue, and the case were here for review upon a record that showed all the evidence used before the jury was not here, then we would presume that the absent evidence authorized the verdict. The same rule obtains in trials by the court. But this rule does not obtain where the court has withdrawn the issue from the jury. In such case the only question is, was there evidence enough to entitle the party offering it to go to the jury. (Easley v. Easley, 18 B. M., 93.)

The Auditor’s, Treasurer’s and bank’s books, including the pass-books, involving the Treasurer’s official transactions that showed his defalcations, are a great many, and for a jury to be required to. investigate the books, item by item, in order to determine whether there was a defalcation, and when, and to what extent, would devolve a duty upon them that they could not understand. Therefore, it would suggest of itself, at first blush, that persons who were competent to investigate and understand the books, and had investigated them sufficiently to explain them to the jury in reference to the question at issue, should be allowed to do so. Of course, he should be able to tell what the books show in reference, to these questions, and he should refer to the books themselves if required to do so.

The pass-book, according to the proof, was regularly and accurately kept by Tate in connection with the discharge of his duties, and it was competent for it to go to the jury as a part of his official transactions in a contest with his sureties on his bond.

The judgment is reversed, and the cause is remanded with directions to grant the appellant a new trial, and for further proceedings consistent with this opinion.