Forest County v. Poppy

The following opinions were filed May 3, 1927: Crownhart, J. Before approaching the question involved on this appeal it may be well to state the general principles of law governing the duties of public officers charged with the care of public funds. — 276 — This court has uniformly held public officials to a strict fulfilment of their official duties. Good public policy requires that this rule be maintained in all its essentials. In an early case in this court, Crocker v. Brown County, 35 Wis. 284, it was said that public officials take their offices cum onere, that is, they take them with all the responsibilities attached. In Omro v. Kaime, 39 Wis. 468, the court quoted approvingly from U. S. v. Prescott, 3 Plow. 578, as follows: “Public policy requires that every depositary of the public money should be held to a strict accountability. Not only that he should exercise the highest degree of vigilance, but that ‘he should keep safely’ the moneys which come to his hands. Any relaxation of this condition would open a door to frauds, which might be practiced with impunity. A depositary would have nothing more to do than to lay his plans and arrange his proofs, so as to establish his loss, without laches on his part. ... No such principle has been recognized or admitted as a legal defense.” This court then added: “And we have certainly no disposition to relax the rule of liability o.n the part of treasurers intrusted with public moneys, by recognizing such a principle [due diligence of the treasurer] as a legal defense to an action upon their official bonds.” The case of U. S. v. Prescott, there cited, was one where a receiver of public funds, being sued on his bond, set up for a defense that the moneys had been feloniously stolen from him although he used due diligence to safeguard the funds. To the quotation by our court the United States supreme court added: “As every depositary receives the office with a full knowledge of its responsibilities, he cannot, in case of loss,, complain of hardship. He must stand by his bond, and meet the hazards which he voluntarily incurs. . . . Prescott and his sureties are not discharged from the bond by a felonious stealing of the money without any fault or negligence on the part of the depositary; and, consequently, that no such defense to the bond can be made.” — 277 — The rule in the Prescott Case has been generally followed in this country. 22 Ruling Case Law, 468, states the principles thus: “It is one of the duties of a public officer intrusted with public moneys to keep them safely, and this duty of safe custody must be performed at the peril of the officer. In effect, according to the weight of authority a public officer is an insurer of public funds lawfully in his possession, and therefore liable for losses which occur even without his fault. The liability is absolute, admitting of no excuse except perhaps the act of God or the public enemy. This standard of responsibility is based on public policy.” In Milwaukee v. Binner, 158 Wis. 529, 149 N. W. 211, this court said: “It is the policy of the law to hold an official custodian of public funds to very strict accountability, and to make him responsible for money illegally disbursed, regardless of whether the municipality received an equivalent or not. There is no other safe course, and any attempt to evade the law must receive judicial condemnation upon every opportunity therefor.” We take this occasion to reaffirm the public policy so stated. The fact that hardship may result occasionally must not alter a public policy founded in public necessity. There is no substantial dispute as to the facts in this controversy. The appellant Poppy was county treasurer for the respondent county during the years 1925 and 1926. The appellant surety company was the treasurer’s bondsman. The board of supervisors of Forest County duly designated as qualified depositories of the county treasurer’s funds the Forest County State Bank, the State Bank of Wabeno, and the Laona State Bank, and no others. The county treasurer, disregarding this designation, deposited certain funds of the county in the First National Bank of Crandon, and refused to deposit said funds in the designated depositories until required by mandamus of the circuit court to do so. He then attempted to transfer the funds to the — 278 — proper depositories by means of checks or drafts drawn on the First National Bank, but before certain of such checks or drafts’ had been cashed and paid into .the proper depositories the First National Bank of Crandon failed and went into bankruptcy. The referee found that there were six items in controversy. The first item represents the balance of county funds in the First National Bank of Crandon when the bank failed, less dividends paid by the bankrupt after the bank closed. The county treasurer attempted to transfer the funds in the First National Bank to the Laona State Bank and the Wabeno State Bank by drafts, which drafts were received and credited to the county treasurer by such banks, but before said banks could secure a transfer of the funds the First National Bank failed and the drawees charged the amounts back to the county treasurer. It is the contention of the appellants that the First National Bank of Crandon was a county depository and the county treasurer had a right to deposit the funds therein. Appellants base this contention upon the fact that the First National Bank, prior to the resolution of the county board on November 11, 1924, was a duly designated depository, and that the county board had not lawfully changed such depository. This contention seems to be frivolous. The county board, in November, 1924, passed a resolution designating depositories for the.county funds, among others the First National Bank of Crandon, conditioned upon their furnishing such bonds as the board might require, and in case any bank should fail to fürnish such bond, then the portion that such bank might be entitled to otherwise receive should be'divided among such banks as did qualify. The First National Bank of Crandon did not furnish such bond. On February 10, 1925, the county board, by resolution, provided that each -depository of the Forest County funds, named at the November meeting of the board, be required to furnish surety bonds of at least $15,000, and that such — 279 — bonds be filed with the county clerk on or before March 15, 1925, and it further provided that the treasurer should keep the county’s moneys in those banks which had filed such bonds, in approximately equal amounts. The First National Bank of Crandon failed to comply with this resolution, and clearly, thereafter it was not a county depository, and the county treasurer and his bondsman became absolutely liable for any loss occasioned by deposits in such bank. Sawyer County v. Frets, 189 Wis. 372, 375, 207 N. W. 940. As to the second item, it is contended by appellants that the county treasurer is not liable for the reason that a check received by the county treasurer from District Attorney Dawson, and accepted by him in payment of a forfeited bail bond, was not paid by the drawee bank. The county treasurer accepted such check as cash and receipted therefor. He had a right to refuse the check and demand cash instead, but he did not do so. The county treasurer, in accepting the check of Dawson, receipting therefor as cash, entering it on his books as cash, and giving the county clerk a duplicate receipt as required by law, cannot now be heard to deny his liability therefor. He became responsible to the county for money thus collected, and he is relegated to his rights against the maker of the check. As to the third item, the county judge, J. A. Walsh, by means of his check paid over fines to the county treasurer to the amount of $153.45, and the transaction is identical in principle with the Dawson check. It is ruled by what has been said with reference thereto. As to items four and five, it appears that county orders had been issued on the First National Bank of Crandon and on the old Citizens State Bank, which orders had never been cashed and had become void by reason of the statutes of limitation. It is contended by the appellants that because the county was no longer liable to pay the orders there was no loss by reason of the failure of the bank. This is a rather novel defense. On that theory, whenever county or — 280 — ders should become invalid by reason of the statutes of limitation, the money in the county treasury represented by the orders might be immediately purloined by the county treasurer. County treasurers will have no opportunity to enrich themselves by any such process. The money in the county treasury remains the money of the county until it is paid out according to law. As to item six: On the 20th of April, 1925, the county treasurer deposited his sight draft on the First National Bank of Crandon with the Forest County State Bank for $2,523. The Forest County State Bank credited his account accordingly, on April, 21st. On the same day the First National Bank of Crandon debited the county account in the same amount. On April 27th the Forest County State Bank debited the county treasurer with $2,347.74. This bookkeeping result was accounted for by the method of the two banks in clearing their checks. The Forest County State Bank received a draft from the First National Bank on April 21st, drawn on the Minneapolis Reserve Bank, for the amount due it on the clearance of their checks, to wit, $2,347.71, but before the Minneapolis Reserve Bank had received payment of the draft in the usual course, the First Nátional Bank failed; therefore the Minneapolis Reserve Bank charged the amount back to the Forest County State Bank, and the Forest County State Bank in turn charged it back to the county treasurer. The appellants urge upon our consideration the law of negotiable instruments. The appellants, by being subrogated to all the rights of the county, may have occasion to seek relief thereby, but here we are concerned with the simple question of whether the county treasurer has properly accounted for the funds intrusted to his care. He was a public official, required to safely keep such funds, and to account therefor as lawfully required. The county treasurer wrongfully deposited the county’s — 281 — money in the First National Bank. For this he was solely responsible, and until he had placed it safely in a legal depository of the county he continued liable for any loss thereof. He sought to transfer the cash by draft on the First National Bank, given to the Forest County State Bank, and thereby he made such bank his agent in making the transfer. Fie now charges the Forest County State Bank in effect with negligence in not procuring the money. Whatever the facts-may be in that regard the county is not concerned. The bank’s acts were the acts of the county treasurer as his agent. The treasurer cannot escape liability by pleading the negligence of his agent. His duty was to deposit the cash in a legal depository. Until he did so he had not complied with the law. It is said that the county treasurer followed a usual and customary practice by accepting and disbursing county funds by means of checks and drafts. Ordinarily there would be no moral delinquency in such proceedings, although the legal responsibility would still be that of the treasurer. But in this case the treasurer brought about his undoing by his pertinacious conduct in keeping county funds, in the First National Bank contrary to law. The circuit court properly held that the treasurer and his surety, upon payment to the county of the judgment herein, may be subrogated to all the rights of the county as to third parties. By the Court. — The judgment of the circuit court is affirmed.