Montgomery County v. Cochran

121 F. 17, 57 C.C.A. 261, 1903 U.S. App. LEXIS 4592

• Court: Court of Appeals for the Fifth Circuit
• Decided: March 3, 1903
• Docket: No. 1,205
• Status: Published

Opinion

SHELBY, Circuit Judge,

after stating the case as above, delivered the opinion of the court.

The foregoing facts show that Montgomery county has lost the price of $100,000 of its bonds. The treasurer and the surety on his bond, admitting that the former gave a receipt for the purchase money of the bonds and charged himself on his account with the same, claim that he cannot be held for a breach of his bond because he never actually received the price in coin or bank bills. It was not incumbent on the treasurer, they contend, to safely keep the proceeds of the sale, because he never received them, and that as to the fund.in question there could be no breach of the bond except failure to safely keep the fund. The plaintiff in .error contends that the treasurer did receive the proceeds of sale, and that he failed to safely keep them.

The defendants’ position is based on section 4 of the act which authorized the issuance of the bonds. It is there provided that the board of revenue is authorized to sell the bonds, and that “the proceeds of said bonds shall be paid over to and kept by the treasurer of said county,” and that the treasurer shall be “responsible for the safekeeping of all of the proceeds accruing from the sale of said bonds which may come into his hands in his official capacity, the same as other county funds or money in his hands as such treasurer.” Acts Ala. 1900-01, p. 703. It is asserted by the defendants in error that it was the duty of the board of revenue to get the “proceeds of the bonds in such shape that when they paid them over the treasurer could keep them until disbursement,” and the keynote to the defense is that the treasurer had no right to receive anything but coin or bank bills as the proceeds of sale of the bonds. These contentions depend on the meaning of the act. Was it the intention of the Legislature that no transactions with the board of revenue and the purchaser of the bonds and the treasurer should be permitted except by the use of coin or bank bills? The statute must be construed in the light of commercial usage and common knowledge of business transactions. The word “money,” when used as in this statute, does not mean only coin and bank bills. “Such a construction,” said Lyon, C. J., in State v. McFetridge, 84 Wis. 473, 515, 54 N. W. 1, 10, 998, 20 L. R. A. 223, “would be extremely technical, and is, we think, uncalled for. ‘Money’ is a generic term, and may mean not only legal tender coin and currency, but also any other circulating medium, or any instruments or tokens in general use in the commercial world as the representatives of value.” And it was held that a certificate of deposit was money within the meaning of a statute. In Taylor v. Robinson (D. C.) 34 Fed. 681, Judge McCormick said: “The term ‘money’ is used to designate the whole volume of the medium of exchange recognized by the custom of merchants and the laws of the country, just as the term ‘land’ designates all real estate.” In Allibone v. Ames, 9 S. D. 74, 81, 68 N. W. 165, 167, 33 L. R. A. 585, the court applies this definition to a certificate of deposit: “When the certificate of deposit was delivered to plaintiff, and accepted by him, it had all the characteristics of money. Its return to the bank must be regarded as a deposit of that amount of currency. It was, the parties so treating it, precisely the same as if the treasurer had received the coin and again deposited it. To say that if a person deposits a draft or certificate of deposit with a bank, and receives credit for the amount of it, he does not make a deposit of that amount, is simply absurd, in view of the modern methods of transacting business.”

And there are other authorities to the same effect, showing that the words “funds or money” and “proceeds of sale,” as used in the act, should not be confined in their meaning to coin and bank bills. State v. Krug, 12 Wash. 288, 41 Pac. 126; Byrom v. Brandreth, 16 L. R. Eq. Cases, 475; State v. Hill, 47 Neb. 456, 66 N. W. 541; People v. McKinney, 10 Mich. 55; Bork v. People, 16 Hun, 476.

The use of checks, certificates of deposit, and other commercial instruments is so universal and so essential in large transactions that we cannot assume that the Legislature of Alabama meant to forbid their use in the negotiation and sale of the bonds. If Josiah Morris & Co. had had the coin on hand to pay for the bonds in question, the transaction would have been conducted by the use of checks or certificates of deposit, and we think without any violation of the terms of the statute. If silver coin had been in bank as the basis of the transaction, its weight (about 6,546 pounds) would have made the use of checks or certificates necessary to conveniently complete the transaction. We think, therefore, that checks or certificates of deposit received in good faith by the board of revenue, and delivered to the treasurer, or delivered by direction of the board of revenue to the treasurer, would be “funds or money” or the “proceeds of sale” of the bonds in the hands of the treasurer. The check for the price of the bonds in the hands of the treasurer, he having receipted for the sanie as money, was “funds or money” in his hands, within the meaning of the statute. It was not his duty to keep the check, but to have it cashed, and to keep the coin or notes received on the check. In doing this, he should conform to the law of the state, and keep the coin or notes under his actual personal control, as, for example, in his own safe, or on special deposit. It is conceded to be the settled law in Alabama that, if the check was money in the treasurer’s hands, it was a conversion of it to make a general deposit of it in a bank. Alston v. State, 92 Ala. 124, 9 South. 732, 13 L. R. A. 659. If there was reluctance' in applying this rule generally to a deposit in a solvent bank, it should be'applied without question under the circumstances under which the treasurer deposited this fund. If the check was funds or money, within the meaning of the statute, that would seem conclusive. But, if it was necessary that the check be collected before it became money, it is urged with great force that the effect of the deposit of the check to the credit of the treasurer was to collect the check. When the check was presented at the bank and accepted by crediting the amount of it to the treasurer, the effect in law of the transaction was the same as if the amount of the check had been handed to the treasurer and by him returned to the bank. National Bank v. Burkhardt, 100 U. S. 689, 25 L. Ed. 766; City National Bank v. Burns, 68 Ala. 267, 44 Am. Rep. 138; Zane on Banks & Banking, § 133.

The condition of the bond sued on is that Cochran, the treasurer, “shall faithfully discharge the duties of such office during the time he continues therein or discharges any of the duties thereof.” One of the treasurer’s duties under the' general statute is to “receive and keep the money of the county and disburse the same according to law.” Code Ala. 1896, § 1429. The act authorizing the bonds provides that the proceeds of the bonds “shall be paid over to and kept by the treasurer,” and applied as provided by the statute. Both by the general statute and by the special act it is made the duty of the treasurer to receive the money arising from the sale of the bonds. If it be conceded that the act may be construed that the board of revenue was to sell the bonds, and first receive the proceeds of sale and pay them to the treasurer, there is nothing in the act to1 forbid the board to permit or require the price of the bonds to be paid directly to the treasurer by the purchaser, the bonds to be delivered to the purchaser on the production of the treasurer’s receipt. So the purchaser’s money reached the treasurer’s hands, it is immaterial whether it passed actually through the hands of the board of revenue or not. The law clearly imposed two duties on the treasurer — first, to receive, and, second, to keep, the funds arising from the sale of the bonds. It would be a breach of the treasurer’s bond for him to refuse to receive and receipt for money lawfully tendered to him. The condition of his bond is for the faithful discharge of his duties, which includes both the receiving and the keeping of the money. In the usual course of business, it would be the treasurer’s duty to receipt for money paid to him. The giving of a receipt for money paid to him is one of his official duties. Acts Ala. 1888-89, p. 1050, § 4-

Having this power to receive and receipt for the funds arising from the sale of the bonds, he executed a receipt for $111,109.58, proceeds of sale of bonds. Admit, for the purposes of the argument, that the contention here is true, that he received no money but received only a “worthless check,” and that there can be no breach of the bond for the failure to safely keep the money, would it not be a breach of the treasurer’s bond for him to execute the receipt alleging that he had received the money, when in fact he had not received it? We have seen that, he is charged with the duty of both receiving and keeping the money. In Alabama, by express statute, the officer’s bond stands as an indemnity against “the improper or neglectful performance of those duties imposed by law.” Code Ala. 1896, § 3087. This statute, before the adoption of the present Code, to which it was transferred, was construed to extend the liability of sureties on official bonds beyond that imposed by the common law. Rev. Code Ala. § 169; Kelly v. Moore, 51 Ala. 364. One of the objects of the statute was to extend the remedy beyond those cases in which a wrong is done in the discharge of the legitimate duties of the office, to those in which a wrong is done under color of office. Mason v. Crabtree, 71 Ala. 479. To receive a “worthless check” as money, receipting for it as money and charging the amount as cash upon his official accounts under such circumstances as to cause a loss to the county, would be, we think, to say the least of it, an improper and neglectful performance of duties imposed by law. And, aside from the statutes, at common law it is an error to suppose that the agreement to perform the duties of the office faithfully means merely that the incumbent will not willfully do any wrong act. It has a stretch beyond this, and is broken by a neglect or by carelessness in the discharge of official duty as well as by an intentional misfeasance. Mayor v. Evans, 31 N. J. Law, 342.

In U. S. v. Girault, 11 How. 22, 13 L. Ed. 587, an action was brought on the official bond of Girault, a receiver of public money. The condition of the bond was that Girault should faithfully execute and discharge the duties of his office as receiver of public moneys. The breach of the bond assigned was that Girault had received a large amount of the public money, which he had neglected and refused to pay to the government. The sureties pleaded that Girault gave receipts as receiver for money to the amount of $10,000, when in fact no money was paid to or received -by him, and that this was the same money mentioned in the declaration. After disposing of the question raised by demurrer to the plea, the court added:

“The principle, however, upon which these pleas are founded, is as indefensible as the rule of pleading adopted for the purpose of setting it up. The condition of the bond is that Girault shall faithfully execute and discharge the duties of his office as a receiver of public moneys. The defendants have bound themselves for the fulfillment of these duties, and are, of course, responsible for the very fraud committed upon the government by that officer which is sought to be set up here in bar of the action on the bond. As Girault would not be allowed to set up his own fraud for the purpose of dis: proving the evidence of his indebtedness, we do not see but that, upon the same principle, they should he estopped from setting it up as committed by one for whose fidelity they have become responsible.”

This case, we think, shows that the execution of the receipts by Girault when he had not received the money was a breach of his duty to faithfully execute and discharge the duties of his office as a receiver of public moneys. If Girault was not liable for the money because he had not received it, he was liable for executing the receipts to the loss of the government in the amount thereof when in fact he had received no money.

In Alston v. The State, 92 Ala. 124, 9 South. 732, 13 L. R. A. 659, the court dealt with a case in many respects like, this one. It was an action by the state of Alabama on the. official bond of the probate judge. The suit was for money alleged to have been collected by the judge, who had received from one Morris his draft or check for the sum of $250 as state license tax for retail dealer. The draft was on the John McNab Bank, of the city of Eufaula, and on January 2d the judge deposited the draft in that bank, and the same was placed to the “credit of A. H. Alston, Judge of Probate, License Money.” The bank was of good repute, and had the confidence of the public. On March 31st the bank made an assignment, and was closed. Alston demanded the money of the bank, but never received it. There was no law? which authorized the probate judge to issue a license for a “worthless check.” The facts showed that he never received any money. It does not appear that he ever saw or touched any money in reference to the transaction. He only received the check on a bank which turned out to be insolvent, and had the same placed to his credit, as stated. The trial court instructed the jury to find a verdict for the plaintiff for the amount of the check, and the Alabama Supreme Court affirmed the decision. Alston was in no better position from having received a bad check than he would have been if he had received the money. The court held that the deposit of the check under the circumstances was merely a general deposit, and that the probate judge had no right to make such deposit of the state’s funds. The result was that he was held liable just as if he had received the $250 in cash and deposited it in the bank. Alston, having accepted payment of the license money by the check of the licensee, and having had the same placed to his credit, it does not seem to have occurred to the court that the check could be treated otherwise than as money in a suit on Alston’s bond. It is admitted that this case would be in point if it were the treasurer’s duty to collect. “It is clear,” the learned counsel admit, “that, if an officer is bound to collect as well as safely keep, he violates the duty of collecting in taking a check which is not afterwards realized.” But it is urged the case has no application, because the treasurer’s only duty was to safely keep the fund when paid to him. Alston, the probate judge, was not a collector in the sense that he was required to take active affirmative steps to collect. No statute required him to search for the licensee. The person intending to retail liquors applies to the probate judge for the license, and it is his duty to issue it only when the amount prescribed by the statute is paid to him. He is a collector only in the sense that he is to receive the .money. A similar duty, as we have shown, is imposed upon the treasurer as to the proceeds of the sale of the bonds. It is his duty to receive such proceeds. The official bonds of the probate judge and county treasurer have the same conditions, and the same statute is applicable to increase their common-law liability.

If the treasurer had received, instead of the check, bank bills, and had deposited them to his credit, as he did the check, and had charged himself with the sum on his account as treasurer, causing the county the same loss as in this case, could he or his sureties, when called on' for settlement, plead that the bills received and receipted for were in fact counterfeit, that the treasurer placed them to his credit in bank, and that the bank had become insolvent? The same argument could be made that is made here, that the statute made his sureties responsible only for the safe-keeping of money, and that he had received no money. The counterfeit bills would be of less value than the check in question. Would such contention constitute a defense to be submitted to a jury? We think not; because, if the bills were genuine, the treasurer, having received and converted them, would be liable on his bond for the amount; if they were not genuine bills, he would be liable for a neglectful or improper performance of official duty in receiving them as genuine. In either case, there would be a plain breach of the bond.

Public policy requires that every officer charged with the duty of receiving and keeping public money should be held to a strict accountability. He should be required to exercise the highest degree of vigilance. When loss has fallen on the public through his official acts, he should not be permitted to avoid responsibility by averments of the improper or neglectful performance of duties imposed on him by law. To permit such defenses would open the door to frauds which might be practiced with impunity. The treasurer or other depositary could lay his plans and arrange his proofs to make good the defense of his sureties by impeaching his own official acts. His own neglect or fraud would become their defense. The condition of the treasurer’s bond and considerations of public policy both forbid such defense. Murfree on Official Bonds, § 694. The Supreme Court has held that a custodian of public money could not defend on the ground that the money was stolen (U. S. v. Prescott, 3 How. 578, 11 L. Ed. 734); nor that he had been robbed of it (Boyden v. U. S., 13 Wall. 17, 20 L. Ed. 527); nor that the notes had been accidentally destroyed by fire (Smythe v. U. S. [decided Jan. 26, 1903] 23 Sup. Ct. 279, 47 L. Ed. —). In the last case the sureties on the bond of the custodian of the money were held for the face value of the burnt notes, although they were merely the government’s promises to pay. This harsh conclusion was reached by a divided court, but is upheld by reason and a sound public policy, for a different conclusion would unduly encourage such fires.

It is true that the obligation of the 'surety is subject to the strictest interpretation, and that his liability must be found within the terms of' his contract; but where the bond is for the faithful discharge of official duty, and stands as indemnity against its improper or neglectful performance, and a loss occurs by failure to discharge such duty, or from a wrongful act done by virtue and authority of the office, such failure and such act are within the very reason and purpose of the law requiring official bonds.

When the board by its clerk declined to receive the check, it was withdrawn, and later the treasurer’s receipt for the price of the bonds was presented. It was then that the bonds were delivered. It is contended that the clerk of the board knew that the treasurer had received only the check. That does not change the result. If the execution of the receipt for the check as for cash and the use of it as proved was a breach of the treasurer’s bond, the fact that the board or its clerk was also guilty of negligence or of some breach of duty would not afford a defense to the treasurer. The county entered into no contract with the treasurer that its officers would perform their duty, and it is not bound by their neglect. Hart v. U. S., 95 U. S. 316, 24 L. Ed. 479; Jackson Co. v. Derrick, 117 Ala. 348, 23 South. 193. If the treasurer and the clerk wrongfully combined to do just what was done, knowing the ultimate result of loss to the county, such acts would not be the less a breach of the bond of the former. The culpability of one of the plaintiff’s agents or officers could not excuse or justify the improper or neglectful performance of duty by another.

The rulings of the Circuit Court are in conflict with the views we have expressed. The judgment, therefore, must be reversed, and the cause remanded, with instructions to grant a new trial.