City of Pocatello v. Fidelity & Deposit Co.

GIVENS, J. — The city of Pocatello sued Pat. J. Phelan and the Fidelity and Deposit Company of Maryland on his bond as city treasurer for an alleged shortage. The surety company appeals from the judgment entered against the surety and in favor of Phelan. The errors assigned are in *48 substance the insufficiency of the evidence to show conversion by Phelan and the entering of judgment against the surety and not against Phelan. The evidence discloses that towards the end of his term of office as treasurer, Phelan, who also held the position of city clerk, was short in his accounts. Blank warrants signed by the mayor were left with Phelan which when signed 'by him as clerk he issued to reimburse himself for cash paid the city employees. On March 5, 1921, he prepared a warrant, plaintiff’s exhibit “PI,” payable to the city treasurer for the exact amount of the shortage which he admitted he had no authority to draw and which was, as to number, a duplicate of one previously .legally issued but for a different amount. This warrant was deposited by Phelan in the First National Bank, where he received credit for it, but according to custom it was carried by the First Savings Bank on which it was drawn until city funds were deposited for its payment, thus making it appear that Phelan had the requisite amount of money on hand at the time he relinquished his office and turned over the city’s funds to his successor but the records disclose that it was never charged against the city on his books. Appellant contends that conceding the warrant, exhibit “PI,” was illegal it was the clerk’s act and consequently the treasurer’s bond was not liable, that it is wholly unimportant how Phelan as treasurer made up the shortage, saying in its brief: “He might have made up the shortage by borrowing it from friends or stealing it, and it would have made as little difference in the one ease as in the other so far as his bond as treasurer is concerned. It is not a question of how he got the money to turn over to his successor, but did he get it and did he turn it over.” If he had in fact made up the shortage the question of how he did so would have been immaterial, but if there was any money deposited in the First National Bank it was money belonging to the city. In other words, the original shortage had evidently occurred some time prior and in order to cover up, the treasurer in collusion with the city *49 elerk, if any funds were transferred, took city funds to make up the shortage. He tried to put money in'the city’s right-hand pocket by taking it out of the left-hand pocket or no money in fact was deposited. If Phelan received from the clerk the amount of this warrant then his account should have been increased that amount in which event he should have turned over to his successor that much more. In cither event he was short. The treasurer knew the purpose for which this warrant was issued and knew that it was a void transaction and the credit appearing in the First National Bank and which appeared in the account turned over to his successor was in fact false and erroneous-. In other words, the warrant transaction merely disclosed the treasurer’s misconduct and the method he had employed in attempting to cover it up. His liability and the liability of his bondsman became fixed at the time of his original conversion, and though his books showed the correct amount, they were false and he did not in fact turn over to liis successor the full amount he should have had on hand. That the bond recited the treasurer was elected" when he was in fact appointed did not avoid the bond or release the surety. (State v. McDonald, 4 Ida. 468, 95 Am. St. 137, 40 Pac. 312.) The omission of Phelan to sign the bond did not release him from liability (State v. McDonald, supra, and Hoebel v. Utah-Idaho Live Stock Loan Co., 39 Ida. 294, 227 Pac. 1048); consequently the trial court erroneously entered judgment in favor of Phelan as against the city. The judgment in favor of Phelan is therefore reversed and the case remanded, with instructions to the court to enter judgment against Phelan and appellant Fidelity and Deposit Company of Maryland for the amount of the shortage with interest. Costs awarded to respondent, City of Pocatello. William A. Lee, C. J., Wm. E. Lee and Taylor, J'J., concur.