State Ex Rel. City of Grinnell v. Carney

FAVILLE, J. I. Defendant Carney was city treasurer of the city of G-rinnell for the term commencing January 1, 1924, and ending April 1, 1925. On January 23, 1924, said treasurer executed his official bond, with the American Surety Company as surety, in the penal sum of $50,000, the condition of said bond being that the said Carney, as treasurer, "shall promptly pay over to the person or officers entitled thereto, all money which may come into his hands by virtue of said office." As treasurer, Carney deposited city funds in the Merchants National Bank of Grinnell, Iowa, of which he was an officer, the last of said deposits being made on October 25, 1924. The bank closed on November 1, 1924, and there was then on deposit in said bank the sum of $61,917. It appears that $50,000 of this sum was secured by a depositary bond executed by said bank and a surety, and that said amount has been paid. This action is to recover the balance of said deposit, less a credit for a dividend *135 that has been paid by the receiver of said bank. Carney resigned as treasurer on January 22, 1925. He did not turn any of said money over to his successor. The appellants pleaded that all the money deposited in the said bank by the treasurer was under the authority of a resolution of the city council of said city, adopted January 7, 1925, the same being as follows: “Be it resolved by the city council of the city of Grinnell, Iowa, that the Merchants National Bank of Grinnell, Iowa, is hereby made the depository for all funds of the city of Grinnell, Iowa, coming into the hands of the treasurer of the city of Grinnell, Iowa.” The court, on motion, struck from the defendants’ answer the allegation setting forth said resolution. The appellants rely upon Officer v. Officer, 120 Iowa 389, School Township v. Stevens, 158 Iowa 119, Hanson v. Roush, 139 Iowa 58, and similar cases, holding to the effect that, when a custodian of public funds deposits the same in a bank, he is not liable for loss unless he is negligent in selecting the depositary. Appellants contend that said resolution of the city council negatives any claim of negligence of the treasurer, in the event that funds are deposited by him in the designated depositary. The foregoing cases were decided by this court prior to the enactment of Section 660-a of Code Supplement, 1913. Said section is as follows: ‘£ That treasurers of cities of the first and second class, cities operating under special charter and cities under the commission form of government shall, with the approval of the city council as to place and amount of deposit, by resolution entered of record, deposit all city funds in any bank or banks in the city to which the said funds belong, at interest at the rate of not less than two per cent per annum on ninety per cent of the daily balances payable at the end of each month, all of which interest shall accrue to the benefit of the general city fund; but before such deposit is made in any bank it shall file a bond for double the amount deposited with sureties to be approved by the treasurer and the city council and conditioned to hold the treasurer harmless from all loss by reason of such deposit or deposits; provided that in cases where an approved surety company’s bond *136 is furnished said bond may be accepted in an amount of ten per cent more than the amount deposited. Said bonds shall be filed with the city clerk and action shall be brought thereon by the treasurer or the city as the council may elect.” This statute was undoubtedly passed to meet the situation that had been created by the previous holdings of this court in the cited eases. Appellants rely upon a change in phraseology in the provisions of Sections 5651 and 5652 of the Code of 1924. Said sections of the Code did not become effective until midnight of October 27, 1924. Clingingsmith v. Jackson Dairy Co., 202 Iowa 773. The last deposit having been made on October 25, 1924, the case must be ruled at this point by the statute then in force, to wit, Section 660-a of Code Supplement, 1913. There is no question involved in this case with regard to $50,000 of the money which was deposited by the treasurer in the bank. The amount involved in this'action is only the excess above the amount that was protected by the depositary bond of the bank. Appellants' contention is that, by virtue of said resolution, it was the duty of the treasurer to deposit all city funds coming into his hands in the designated depositary bank, and that, having done so, neither he nor the surety on his bond as treasurer can be held liable for any funds so deposited, even though they exceeded in amount the liability of the depositary bond. It is obvious that the city council could not by resolution absolve the treasurer and his official bond from liability for funds deposited in a bank, merely by the adoption of a resolution directing the city treasurer to deposit the fund. The city council had no jurisdiction in regard to said funds, except as conferred upon it by the quoted statute. This provided that the city council, by resolution of record, could authorize the deposit of city funds in a bank, and require that, before such deposit was made, a bond must be filed for double the amount deposited, with sureties to be approved by the treasurer and the city council. The limit of the authorized deposit under this statute was necessarily covered by the provisions of the bond. In other words, under this statute, the city council could properly designate a certain bank as a depositary, and authorize the city treasurer to deposit funds in said bank to an amount protected *137 and covered by the depositary bond. It could not, under such statute, authorize the city, treasurer to deposit funds in said bank in excess of the amount protected by said depositary bond, or to deposit funds without any depositary bond. The council, having named the depositary and fixed the amount of the bond and approved the same, did by said act necessarily fix and limit the amount of funds that the treasurer could legally deposit in said bank. Any amount deposited by the treasurer in excess of said amount so fixed Avould not be protected by said depositary bond, Avould be in contravention of the provisions of the statute, and Avould be in exactly the same situation as though the treasurer had deposited the same in some other bank. It is to be observed that said statute required the city treasurer to deposit the city funds in approved depositaries where they were protected by proper depositary bonds. The statute is mandatory that the treasurer “shall” deposit city funds in a designated depositary Avhere they shall be protected by a proper depositary bond. Provision is made for making such deposits in any bank or banks in the state that will accept the same on the terms and conditions of the statute, if no bank in the city will accept them. Code Supplement, 1913, Section 660-b. Therefore, if the treasurer has in his hands funds which he sees fit not to deposit in the designated depositary, he certainly must be held liable therefor, under the provisions of the statute, on his official bond. If the amount of said funds in his hands exceeds the amount that he may lawfully deposit in the designated depositary under the protection of the bond furnished by it, then the city treasurer must see to it that another depositary is designated and a new bond given, or that the amount authorized to be deposited in said designated depositary is increased to meet the new conditions, and is protected by an approved bond. The city council could not, by resolution, authorize the treasurer to deposit funds in excess of the amount protected by the depositary bond, any more than it could by resolution authorize the treasurer to deposit funds in some depositary without having the same protected by any depositary bond. It is to be observed that the statute has been amended. See Code of 1927, Section 5651 ef seq. At this point we hold that the court did not err in striking from the appellants’ answer the allegations with respect to the said resolution adopted by the city council. *138 II. It is contended that the court erred in striking from the amendment to the appellants’ answer an allegation to the effect that the treasurer believed the bank in which he deposited said funds to be a safe depositary, and believed that the same was a solvent and safe institution for the custody of said fund, and that he was not negligent in depositing the same in said bank. As we have heretofore pointed out, the question of the negligence of the treasurer in depositing said excessive funds in said bank is not involved in this case. The statute governs the matter of deposits of said funds. The statute is mandatory, and not merely permissive. The provision is that the treasurer “shall, with the approval of the city council as to place and amount of deposit, by resolution entered of record, deposit all city funds in any bank or banks in the city * * It is not a question of whether the treasurer used good faith, or was or was not guilty of negligence in depositing the funds of the city in an unauthorized manner. The statute directs how city funds shall be deposited by a city treasurer. That is the sole manner provided by statute. Obedience to the statute protects the city treasurer with regard to the funds so deposited. There is no elasticity in the statute by which it can be stretched to cover funds that are not deposited according to its terms. Diligence or good faith on his part cannot excuse the city treasurer with regard to funds coming into his hands which he fails to deposit in accordance with the mandate of the statute. There was, therefore, no error in striking said amendment. III. It is contended that the court erred in permitting the appellee to amend its petition to conform to the proof, after verdict. Upon the trial, the evidence shows that the $50,000 depositary bond given by the bank was the only depositary bond given by said bank. This was conceded of record by both parties. The original petition did not allege the fact that said $50,000 bond was the only depositary bond, and after verdict the appellant surety company filed a motion in arrest of judgment, setting up that the petition did not allege that there had not been an additional depositary bond given by said bank. Thereupon, by leave of court, appellee amended its petition, alleging that the $50,000 bond was the only one given, said allegation being in full accord with the concession of record in said cause. *139 Under such circumstances, it was not error to grant leave to amend the petition to conform to the uncontroverted proof. See Sections 11557, 11558, 11559, Code of 1924; Halligan v. Keller, 167 Iowa 72; Davis v. Chicago, R. I. & P. R. Co., 83 Iowa 744. IV. Error is predicated upon the admission in evidence of the testimony of a witness to the effect that a demand was made upon the appellant surety company for said fund before suit was brought. It appeared without objection that written demand had been made upon the treasurer for the payment of the money. The terms of the bond in suit required the treasurer to promptly pay over to the person or officers entitled thereto all money which came into his hands by virtue of his office. His term of office expired January 22, 1925. He did not turn over to his successor, who was entitled thereto, all the money which came into his hands by virtue of his office. This suit was instituted on the 6th day of July, 1925. No demand was necessary. Under the terms of the bond, a duty rested upon the treasurer to turn over the funds coming into his hands as treasurer, to his successor in office. This, under the allegations of the petition, he had failed to do, and demand had been made upon him therefor. The bringing of this action against the surety, in view of the terms of the bond, was sufficient demand. See Town of Cicero v. Grisko, 144 Ill. App. 564, at 588; Foster v. State ex rel. City of Huntington, 22 Ind. App. 471, and cases cited. V. . Appellants complain of the action of the court in overruling a motion for continuance. The appellee amended its petition just before the trial commenced. The petition contained an allegation which was, in effect, a charge of negligence on the part of the treasurer in depositing said funds in said bank. This allegation was withdrawn. Certainly no prejudice could have resulted to the appellants by proceeding to trial at said time. Appellees raised no new issue, but, on the contrary, eliminated one. No new proof could have been required on the part of the appellants to meet the petition as amended. There was no error at this point. The judgment of the lower court is&emdash;Affirmed. Stevens, C. J., and Morling and Kindig, JJ., concur. Albert and He Graff, JJ., dissent. *140 Evans and Wagner, JJ., not participating.