Case Name: COUNTY OF CASS v. LEE
Court: Michigan Supreme Court
Jurisdiction: Michigan
Decision Date: 1935-05-17
Citations: 271 Mich. 491
Docket Number: Docket No. 44, Calendar No. 38,138
Parties: COUNTY OF CASS v. LEE.
Judges: Potter, C. J., and Nelson Sharpe, North, Wiest, Butzel, and Edward M. Sharpe, JJ., concurred with Fead, J.
Reporter: Michigan Reports
Volume: 271
Pages: 491–499

Head Matter:
COUNTY OF CASS v. LEE.
1. Depositaries — Statutes—Designation.
Under 1 Comp. Laws 1929, § 1193 et seq., it is the duty of the board of supervisors to designate biennially depositories of county funds.
2. Same — Statutes—Bonds—Discretion op Governing Bodies.
Act No. 40, Pub. Acts 1932 (1st Ex. 'Sess.), committed to governing bodies of counties and certain other public bodies the discretion as to whether depository bonds should be required for public moneys.
3. Contracts — Construction—Intent.
In construing a contract, intent of the parties must be gathered, not from what one party now says he then thought but failed to communicate to other party, but from the contract itself.
4. Depositaries — Separation into Old and New Deposits.
In action against sureties on county fund depository bond for preceding biennium, the deposit is not separated into old and new with reference to date of resolution accepting new bids of banks for such- deposits for ensuing biennium, where such separation is not contemplated by statute, bids or resolution (1 Comp. Laws 1929, § 1193 et seq., Act No. 40, Pub. Acts 1932 [1st Ex. Sess.]).
5. Same — Acceptance oar New Depositary Agreement.
Board of supervisors which, unequivocally accepted bids of banks for deposit of all county funds for ensuing biennium, which bids expressly refused to furnish depository bonds in compliance with Act No. 40, Pub. Acts 1932 (1st Ex. Sess.), held, to have effected a new depository arrangement that superseded and discharged all former ones except as expressly reserved.
Biishnell, J., dissenting.
Appeal from Cass; Warner (Glenn E.), J.
Submitted January 10, 1935.
(Docket No. 44, Calendar No. 38,138.)
Decided May 17, 1935.
Assumpsit by County of Cass, against Fred E. Lee and others on surety bond. Judgment for plaintiff. Defendants appeal. Reversed, without new trial.
Ulysses 8. Eby and Carroll B. Jones, for plaintiff.
Carl D. Mosier, Harry C. Howard and Gore, Harvey <& Fisher, for defendants.

Opinion:
Fead, J.
1 Comp. Laws 1929, § 1193 et seq., are specific in their provisions for deposit of county funds. Under the statute the bond at bar expired December 31, 1932. It was the duty of the board of supervisors to designate depositories for the two-year period beginning January 1, 1933. ' The bid of the five banks of the county, filed October 18, 1932, was provided for by statute and covered the ensuing two years after December 31st. It was the duty of the board to accept or reject the bid. If it accepted, it would contract for the safe keeping of the funds and arrange the depository bond. If it rejected the bid, it was bound to seek bids from other banks. The law provided that no county moneys should he deposited until a depository bond had been approved.
Act No. 40, Pub. Acts 1932 (1st Ex. Sess.), made no change in the machinery of the above statute except that it suspended operation of the provision requiring depository bonds and committed to the board the discretion as to whether bonds should be required. This act was adopted to relieve an intolerable situation caused by banking conditions, refusal of surety companies to write depository bonds or official bonds carrying depository liability, and inability of private sureties to qualify or their unwillingness to assume the risk of bank failures. Suspension of laws requiring depository bonds was necessary to carry on the public business and to prevent general bank failures. It was done by providing that all public bodies, except the State, should designate depositories, the designation to relieve the bonds of officers from liability for bank deposits, and permitting local funds to be deposited locally on such conditions as local boards should find possible or advisable.
In line with what seems to have been a practice of the board of supervisors, the matter of deposits was not determined at the October, 1932, meeting, but the bid was referred to the judiciary committee and the meeting was adjourned to January. On January 9, 1933, the board adopted a resolution:
"On motion of Supervisor Harwood, supported by Supervisor Carter, the following county banks were named as depositories: The clerk and treasurer were instructed to divide the funds as' equally among the five banks as possible."
The banks named were the five which had submitted the bid in October. Informally and not of record, in October and January, the board and the judiciary committee discussed the clause in the bid:
"We will furnish no bond for such deposits in compliance with Act No. 40, Pub. Acts 1932 (1st Ex. Sess.)."
The movers of the resolution testified they thought the former bonds would continue to cover past and future deposits, and so the failure to insert in the resolution a requirement for depository bonds was intentional. This view was not communicated to the banks or sureties; nor can it change the legal effect of what was done. They understood the resolution was an acceptance of the bid.
Aside from the understanding of individual supervisors, the bid and resolution constituted an offer and acceptance, resulting in a contract, in accordance with the statutes and the powers of the board, for deposit of county funds for two years without depository bonds. It substituted a new contract of deposit for the arrangement which had expired on December 31st. ' If a new depository bond had been ordered and given, it would have been substituted for the former bond and have discharged it. Lawrence v. American Surety Co. of New York, 263 Mich. 586, 604 (88 A. L. R. 535). And the new bond would have covered both existing and future deposits.
"Presentation and approval of security for funds already deposited is equivalent to withdrawal and redeposit and releases the former security from future liability and binds the new, if so intended." Lawrence v. American Surety Co. of New York, supra, 602.
The intention must be gathered not from what a party now says he then thought but from the con tract itself. The unequivocal acceptance of the offer fixed the intention of the parties to create a depository contract without bonds. It could have no other effect than a substitution for the former arrangement and its release.
Separation of the deposits into old and new, with reference to the date of the resolution, is artificial and arbitrary. The statute does not provide for it. The statute contemplated a new arrangement after' December 31, 1932, covering all county funds. The board could have ordered a separation and bond for part but did not. The bid did not suggest a division; nor did the resolution. On the contrary, the latter contemplated a single arrangement covering all funds because it provided for equal distribution among the banks.
United States Fidelity & Guaranty Co. v. City of Pensacola, 68 Fla. 357 (67 South. 87, Ann. Cas. 1916 B, 1236), and contra cases, Pacific County v. Illinois Surety Co., 234 Fed. 97, and United States Fidelity & Guaranty Co. v. American Bonding Co., 31 Okla. 669 (122 Pac. 142), are not in point because they did not involve a new depository agreement made after the termination of the bond nor a statute such as Act No. 40, Pub. Acts 1932 (1st Ex. Sess.).
In my opinion, the invoking of Act No. 40 results in a new depository arrangement which supersedes and discharges all former ones except as they may be expressly reserved. Upon no other construction could the purpose of the statute have been worked out and the public interest and necessities of official business conserved.
Eeversed, without new trial, and with costs to defendants.
Potter, C. J., and Nelson Sharpe, North, Wiest, Butzel, and Edward M. Sharpe, JJ., concurred with Fead, J.