City of Billings v. Massachusetts Bonding & Insurance

MR. JUSTICE FORD delivered the opinion of the court. This action was brought by plaintiff against Clara N. Hunt, its former treasurer, and Massachusetts Bonding & Insurance Company, her official bondsman, to recover the amount of money on deposit in Yegen Bros., Bankers, hereafter called the bank, and lost through the failure of the bank. The bank closed February 15, 1924, at which time defendant Hunt, as city treasurer, had on deposit city funds in the sum of $51,011.44; there were depository bonds aggregating the sum of $27,500, which had been duly approved by the city council, and a minute entry of such approval entered upon the records of the proceedings of the council. At the time of the closing of the bank there were no other depository bonds. The sum of $27,500 has been paid by the sureties on the depository bonds and the balance of $23,511.44, the amount sued for, has not been paid to plaintiff. One of the depository bonds, written by the American Surety Company, in force and effect from October 1, 1923, to October 1, 1924, contains this language: “The condition of the obligation is as follows: That whereas the said James M. Noyes, *93 as city treasurer, has deposited or is about to deposit, and intends hereafter to deposit from time to time in and with said principal [Yegen Bros., Bankers] to his credit as city treasurer of the city of Billings, State of Montana (and his successor may deposit) certain moneys belonging to the city of Billings, State of Montana, or by him held and possessed as custodian by virtue of his trust and office. * * « Now, therefore, the condition of this obligation is such that if the said Yegen Bros., Bankers, of Billings, Montana, the said surety, or either of them, shall well and truly indemnify and save harmless the said James M. Noyes as city treasurer, his successor in office, and the city of Billings, from all damage and loss of every kind by reason of deposits of such money as heretofore or hereafter made in or with said bank,” etc. The depository bond, in the penal sum of $7,500, written by the Continental Casualty Company, dated December 22, 1923, and approved by the city council on January 3, 1921, contains similar provisions and conditions. The cause was tried before the court sitting without a jury. Findings of fact and conclusions of law were made in favor of plaintiff, upon which judgment was entered for the amount sued for, with interest and costs. Defendants appeal from the judgment. The court found, among other things: “That the city council of the plaintiff had designated the bank of Yegen Bros., Bankers, as one of the depositories of the plaintiff’s money. That the city treasurer, Clara N. Hunt, had procured a number of bonds to secure the city for deposits made or to be made in said bank, but the only two bonds which were valid and which had not expired are the two mentioned in Finding No. 1. That all other bonds had expired, and there were no renewals or approval of other renewals by the city council. That the city council of the city of Billings did not designate the amount of the bond which the defendant Clara N. Hunt as city treasurer, should require of the bank of Yegen Bros., Bankers, neither had it taken any action direct *94 ing the said defendant, Clara N. Hunt, to deposit in said bank any sum in excess of $27,500.00.” The court concluded, as a matter of law, that the city treasurer was guilty of neglect in permitting any money in excess of $27,500 to remain in the bank without presenting to the council bonds satisfactory to the council to secure any excess above the amount named, and that plaintiff was entitled to judgment for any such excess. The above findings are sustained by the evidence, but it should be noted that the evidence regarding depository bonds which had expired is indefinite and unsatisfactory, and does not establish liability upon the part of defendants, since the date of expiration of those bonds does not appear, nor their amount, that they had ever been accepted and approved by the city council, or that any official action had been taken by the council after their expiration, while it conclusively appears that the council failed, by resolution or otherwise, to designate or fix the amount of depository bonds the bank should be required to furnish. Section 4767, Revised Codes 1921, as amended by Chapter 89, Laws of 1923, so far as pertinent, provides: “It shall be the duty of all * * * city * * * treasurers to deposit all public moneys in his possession and under his control in any solvent bank or banks located in the * * * city * * * of which such treasurer is an officer, subject to national supervision or state examination as the * * * council * * * may designate, and no other. * * * The treasurer shall take from such banks such security as the * * # council * * * may prescribe, approve and deem fully sufficient and necessary to insure the safety and prompt payment of all such deposits on demand together with the interest thereon. * * * "Where moneys shall have been deposited in accordance with the provisions of this Act, the treasurer shall not be liable for loss on account of any such deposit that may occur through damage by the elements, *95 or for any other cause or reason occasioned through means other than his own neglect, fraud, or dishonorable conduct.” The legislature has vested in the city council discretion to determine and prescribe such security as it “shall deem sufficient” without regard to the amount of deposits made. This statute was before this court in the ease of City of Missoula v. Dick, 76 Mont. 502, 248 Pac. 193, 195, and Mr. Justice Matthews, speaking for the court said: “The amount of security to be given for the deposit of city funds is thus left to the deliberate judgment of the city council, and, in the absence of fraud, bad faith, or flagrant abuse of discretion, courts cannot interfere, even though the result reached may be unjust and erroneous. (State v. State Board of Equalization, 56 Mont. 413, 185 Pac. 708, 186 Pac. 697.) Here there is no suggestion of fraud, bad faith, or abuse of discretion; the council prescribed and approved the bond which should be given to cover all deposits made between May 10, 1922, and May 10, 1924. As the matter was left to it, it could prescribe security either less than, or in excess of, the amount of such deposits. If we could read into the statute a requirement that the council prescribe security in excess of the deposits, we could as well restore the requirement of double the amount which was wiped out by the legislature; but our province is to apply the law as we find it and not to make laws. When, in 1913, the legislature amended the then existing provision, it declared that thereafter the new rule should be applied, and, had it intended that public funds should at all times be protected by security in excess of the deposits, it would have said so in no uncertain terms. As the matter of the amount of security was left to the discretion of ithe council, it was its duty, if it deemed the bond on file insufficient to protect the full amount of the deposits, to prescribe what further bond should be furnished and to so notify the treasurer, or it might with propriety have directed the treasurer, at the time it prescribed the bond for the period mentioned, not to deposit to exceed a certain amount until further security was prescribed and approved; it did neither, and therefore, as *96 the bond prescribed was in effect and covered all deposits made, the law was complied with and the deposits made became merely general deposits.” To the same effect are State ex rel. School District v. McGraw, 74 Mont. 152, 240 Pac. 812; County of Missoula v. Lochrie, 83 Mont. 308, 271 Pac. 710. It follows that the court erred in its conclusions of law, and the judgment based thereon cannot stand. The conclusion we have reached does not conflict with the decision in State v. Rosman, 84 Mont. 207, 274 Pac. 850, 852. In that ease the depository bond given to secure county funds and regularly approved by the board of county commissioners had expired, and the county treasurer permitted county funds to remain on deposit in the bank without any bond whatever, and we held that the treasurer and her official bondsmen were liable for the moneys lost through the bank’s failure, while in the ease before us there are bonds duly approved by the city council, under which the sureties obligated themselves to indemnify plaintiff from all loss and damage of every hind, “by reason of deposits of such moneys as heretofore or hereafter made, in or with said bank,” and no other bond was ever required by the city council or furnished by the bank. Here, as in the Dick Case, supra, the city treasurer had depository bonds which on their face were sufficient in amount, in the judgment of the city council, to secure all moneys on deposit in the bank. We conclude, upon the facts disclosed by the record, that the council deemed the bonds furnished and approved “fully sufficient and necessary to insure the safety and prompt payment of all such deposits.” The judgment is reversed and the cause remanded to the district court of Yellowstone county, with direction to enter judgment for defendants. Associate Justices Matthews and Galen concur.