Case Name: Addison Shanklin et al. v. The Board of Commissioners of Madison County
Court: Supreme Court of Ohio
Jurisdiction: Ohio
Decision Date: 1871-12
Citations: 21 Ohio St. 575
Docket Number: 
Parties: Addison Shanklin et al. v. The Board of Commissioners of Madison County.
Judges: Welch, C. J., and White, Day and McIlvaine, JJ.t concurred.
Reporter: Ohio State Reports, New Service
Volume: 21
Pages: 575–585

Head Matter:
Addison Shanklin et al. v. The Board of Commissioners of Madison County.
1. The liability of a county treasurer, incurred by his embezzlement of the public funds in his custody, is a sufficient consideration to support the assignment of a banker’s certificate of deposit to the county, in reimbursement of the loss.
2. The transfer of such certificate by delivery, without indorsement, is a valid assignment, effectual to pass the property therein, if so intended; and the beneficial interest having vested thereby, its subsequent indorsement by the administrators of the assignor can only operate on the naked legal title, the transfer of which, being a barren possession in their hands, cannot prejudice his estate.
3. The warrant of the county auditor, required by section 8 of “ the act to establish the independent treasury of the State of Ohio,” passed April 12, 1858, is neither a condition nor muniment of title; and the transfer of a banker’s certificate of deposit, in a mode otherwise sufficient to pass the property therein to the county, will not be avoided by its deposit in the county treasury without the authority of such warrant.
4. County commissioners are clothed with power to accept the assignment of such certificate on account of the liability of a county treasurer incurred by Ms embezzlement of the public funds in his custody, and to maintain an action thereon against the makers. *
5. The acceptance of such certificate by the commissioners, with knowledge of the embezzlement on account of which it is transferred, does not place the county in pari delicto, so as to vitiate the transfer and avoid recovery.
Motion for leave to file a petition in error, to reverse a judgment of the district court of Madison county.
The material facts disclosed by the record in this case are, in substance, as follows ;
On the 24th of September, 1868, Horace Putnam, as principal, with others, his sureties, made and delivered to the plaintiffs in error, an unincorporated banking company, their negotiable promissory note for $5,000, payable at one year. In consideration therefor the banking company, on the same day, made and delivered to Putnam their certificate of deposit for $5,000, “payable to the order of himself on return of this certificate.”
At the date of this transaction Putnam was, and until his death, on the 12th of May, 1869, continued to be treasu xer of Madison county. Previous to making his semi-annual1 settlement in March, 1869, he had secretly embezzled $5,000' of the funds of the county ; and, to make restitution, deposited said certificate in the county treasury. At his semi- . annual settlement, made with the commissioners of the county in March, 1869, he produced to them, with the money in the treasury, and as part of the funds of the county, the said certificate of deposit, which was by them received and counted as a part of such funds, and the auditor of the county was directed to enter the same to his credit on the journals-of their proceedings, it being the intention of Putnam then and thereby to transfer the same to the county. The commissioners, at that time, had no knowledge that the consideration of the certificate was the promissory note mentioned, above; but believed it to have been given for the money of thp county. No assignment was indorsed thereon by Putnam during his life ; but, after his decease, the certificate was, on the 19th of May, 1869, formally indorsed by his-administrators to his successor in office, at the treasury of the county, within which it then was, and subsequent to said, settlement continuously had been.
On the 20th of May, and again on the 25th of September, 1869, the then treasurer of the county presented the certificate to the plaintiffs in error, and payment thereof having been refused, the commissioners commenced an action thereon-against them in the court of common pleas.
In their answer to the petition filed against them, the company controverted the alleged deposit of the certificate in the-county treasury, and transfer thereof by delivery to the commissioners, in the lifetime of Putnam ; also the authority of his administrators to assign the same, averring that his-estate was insolvent, and that such transfer would operate as-a fraud upon his creditors, among whom they were numbered ; and finally they sot out the said promissory note, alleging that it was the sole consideration of the certificate, and that the whole thereof was unpaid.
The answer is traversed by reply.
The cause being on trial to a jury, the plaintiffs in error requested the court to instruct the jury, “ that if they found from the evidence that the true and only consideration for the said certificate of deposit, by the defendants made and delivered to the said Horace Putnam, was the promissory note, a copy of which is set forth in the pleadings, and that Horace Putnam was the principal of said note, and the other makers were his sureties, and that no part of the same has been paid, and that at the time of the endorsement of said certificate by his administrators the estate of said Horace Putnam was insolvent, that then the title to said certificate did not pass to the plaintiffs, and that it is not entitled to recover thereon against the defendants the amount thereof, even though the jury should find further, that the said Horace Putnam, after he made the said loan of the defendants, and obtained said certificate, deposited the same in the safe in his office, as county treasurer, and that on the — day of March, 1869, while the same was so deposited in the safe in the office of said treasurer, the commissioners of said Madison county went to said treasurer’s office, in pursuance of law, to examine the condition of the treasury, and make their semi-annual settlement with the said treasurer, and the said Putnam, on said examination, produced to said commissioners, along with the money in said treasury, and as part of the funds of said county, the said certificate of deposit, and the same was thereupon counted as part of the funds of said county; and that, independently of said cer tificate, there would have been a deficiency of five thousand dollars in the said treasury; and that at the time the said commissioners counted and received the same, they had no knowledge that the consideration of said certificate was the note aforesaid, but believed the same to have been given for the money of the county; and that having made the said settlement with said treasurer, they directed the auditor of said county to enter said settlement on the journal of their proceedings, and enter said certificate as a part of said settlement ; and that it was the intention of said Putnam, at the time of said settlement, to transfer the said certificate to the county as part of the funds thereof; and that the com missioners, at the time of said settlement, received it as such, and that the said certificate afterwards remained in the possession of the said Putnam, as such treasurer, until his decease, in pursuance of said settlement and arrangement, and was found in the safe of said county, in the said treasurer’s office, among other assets of said county, after his decease.”
This instruction the common pleas refused to give, but charged the jury “ that if they found the facts as stated and recited in said instructions so asked by the defendants, the title to said certificate became vested in said county, and the plaintiffs are entitled to recover the amount thereof from the said defendants.”
Judgment having been entered against the plaintiffs in error, and a motion for a new trial overruled, the record was removed to the district court, on error, wherein the action and rulings of the common pleas were affirmed; to reverse which leave is now asked ’to file a petition in error in this ‘Court.
8. A. Bowman, for the motion,
argued that the facts rented in the charge of the court below did not vest the title to the certificate of deposit, in the board of county commissioners, so as to deprive the defendants below of the set-off they would have to the certificate in the hands of Putnam or his representatives'; that the certificate was in no wise connected, in its consideration, with the public funds, and being the individual property of Putnam, the commissioners could not, on behalf of the county, acquire any title or interest in the certificate except by a contract of purchase ; that •they could not acquire title by gift, because a gift would be void, as against the creditors of Putnam, among whom were the defendants below ; that, in the transaction the commissioners exceeded their power; and in accepting from the treasurer the certificate in the place of the money, they became particeps criminis — citing; S. & C. Stat. 1606, secs. 2, 3, 8, 9 ; 1610, sec. 15 ; 1598, sec. 11: 244, sec. 7; 245, sec. 10; 250, sec. 4,; S. & S. Stat. 88, sec. 7 ; 920, sec. 1; Hunter v. Com’rs of Mercer county, 10 Ohio St. 515 ; Treadwell v. Com’rs of Hancock county, 11 Ohio St. 183: Com’rs of Gallia county v. Holcomb, 7 Ohio pt. 1, 232 ; Brown v. The State, 18 Ohio St. 496 ; Hall v. Mullen, 5 Har. & J. 193 ; Wheeler v. Russel, 17 Mass. 257 ; Sadenbender v. Charles, 4 S. & R. 159 ; Mason v. Conlon, 4 Dall. 298 ; Biddis v. James, 6 Binn. 321; Bank v. Owens, 2 Peters, 198 ; Bank v. Swayne, 8 Ohio, 257 ; Com’rs of Delaware county v. Andrews, 18 Ohio St. 49; Strauss & Bro. v. The Eagle Ins. Co. 5 Ohio St. 59 ; Trimble v. Doty, 16 Ohio St. 119 ; Robinson v. Robinson, 17 Ohio St. 480.
Harrison <& Marsh, contra :
The county acquired a perfect equitable title to the certificate in March, 1869 : upwards of six months before the promissory note became due. 2 Story’s Eq. Jur. sec. 1047; Grover Adm’r v. Grover, 24 Pick. 261; Newby v. Hill, 2 Metec. (Ky.) 530 ; Smith v. Sterritt, 24 Mo. 260; Wiggins v. McDonald, 18 Cal. 126 ; Thigpen v. Home, 1 Ired. Ch. 20 ; Rollison v. Hope, 18 Texas, 446 ; Runyon v. Merserau, 11 Johns. 534; Prescott v. Hull, 17 Ib. 284; Harrisons. Hill, 14 Maine, 127 ; Porter v. Dunlap, 17 Ohio St. 591 ; Bates v. Dandy, 2 Atkins, 206 ; Broom’s Legal Maxims, 358 (margin); Heath v. Hall, 4 Taunt. 327 ; Kimball v. Huntington, 10 Wend. 680 ; Welch v. Mandeville, 1 Wheat. 233 ; Hoke’s Ex’r v. Carter’s Adm’r, 12 Ired. 324 ; 12 Mass. 346 ; 13 Mass. 304; 15 Mass. 481 ; 13 Johns. 95 ; 1 Caine, 363 ; 3 Johns. 71, 72 ; Hooker v. Eagle Bank, 30 N. Y. 83.
The commissioners did not exceed their powers, in accepting, in their settlement with Putnam, an assignment of the certificate in payment of his indebtedness to the county. Chowne v. Baylis, 31 Beav. 351; Vankirk v. Clark et al, 16 Serg. & Rawle, 286, 290; 2 Wallace (U. S.) 501 ; Carder v. Com’rs of Fayette county, 16 Ohio St. 353, 369 ; The State v. Piatt, et al, 15 Ohio, 15, 23; S. & C. Stat. 1585, 244, 246, secs. 7, 13, 17; 249, sec. 30 ; The State, for use, &c. v. Orr et al, 16 Ohio St. 522 ; Board of Com’rs v. Saunders, 17 Ind. 437, 439 ; Combs v. Lane, 4 Ohio St. 112 ; Bremer county v. Barrick, et al, 18 Iowa, 390 ; White's Bank of Buffalo v. Toledo Ins. Co. 12 Ohio St. 601: Potter v. Bank of Ithica, 5 Hill, 490 ; Baird v. Bank of Washington, 11 Serg. & Rawle, 411 ; Frank Bank v. Johnson, 24 Maine, 490 ; Lewis v. Eastern Bank, 32 Maine, 90 ; White v. Brocau, 14 Ohio St. 339 ; Story on Agency, secs. 229-231 ; Alexander & Co. v. Springfield Bank, 2 Metc. (Ky.) 537 ; S. & S. Stat. 920 ; Burgett v. Burgett, 1 Ohio, 480; Armstrong v. Toler, 11 Wheat. 258.
The county having a complete equitable title to the certificate in Putnam's lifetime, was entitled to recover without reference to the endorsment made by the administrators. Martin v. Kunzmuller, 37 N. Y. 396; Ross & Richer v. Johnson, 1 Handy, 388 ; Code, sec. 99 ; Pancoast v. Ruffin, 1 Ohio, 381; Rogerson et al v. Ladbroke et al, 1 Bing. 93 ; Bradley v. Angel, Ex’r, 3 N. Y. 475 ; Spencer v. Barber, 5 Hill, 569 ; Ainslie v. Boynton, 2 Barb. 263 ; Duncan v. Lyon, 3 Johns. Ch. 385, 360 ; Waterman’s set-off and counter-claims, 589, 590, 591.
The administrators had the right to assign the certificate, 2 Williams on Ex’rs, (marg.) 848 ; Story on Prom. Notes, §§ 63, 64, 120, 123 ; Byles on Bills, 41, 43 (3d Am. ed.) Hertell v. Bogert, 9 Paige Ch. 52; and in doing so, only performed their duty.

Opinion:
West, J.
This motion is founded on exceptions to the ruling of the court below. It assumes that the alleged transfer of the certificate in controversy vested no right to recover thereon against the defenses set up, because :
1. It was unsupported by a consideration of value.
2. It was without indorsement in the lifetime of the assignor; and the subsequent indorsemont by his administrators was fraudulent and void as against creditors of his estate.
3. The deposit of the certificate in the treasury of the county was not authorized by the warrant of the county auditor.
4. The commissioners exceeded their powers in assuming to accept it.
5. Its acceptance by the commissioners, with knowledge of the embezzlement on account of which it was transferred, was so lar an acquiescence in the crime as to place the county in pan delicto, thereby vitiating the transfer, and avoiding recovery.
I. Horace Putnam, by his embezzlement of the funds belonging to Madison county, incurred an indebtedness to it in an amount equal to the sum embezzled, recoverable by action against him in his individual character, as upon an implied promise, or upon his official bond, as for a breach thereof. S. & S. Stat. 920; Chowne v. Baylis, 81 Beav. 351. This indebtedness was a sufficient consideration of value to support the assignment of any commercial or other form of security in payment or satisfaction thereof, either by him on his implied promise, or by him or his official sureties, on account of the breach of his bond. His liability in either form constituted a sufficient consideration for the transfer of the certificate in question, and it is a matter of indifference to which it be referred.
II. Indorsement of the certificate by Horace Putnam was not essential to vest in Madison county the light to recover thereon. That its transfer by delivery, without indorsement, was valid and effectual to pass the property therein, if so intended, is sustained alike by principal and authority. 2 Story's Eq. § 1047; Grover's Adm'r v. Grover, 24 Pick. 261 ; Newby v. Hill, 2 Metc. (Ky.) 530 ; Rollison v. Hope, 18 Texas, 446 ; Runyan v. Merserau, 11 Johns. 534 ; Harriman v. Hill, 14 Maine, 127 ; Porter v. Dunlap, 17 Ohio St. 591 ; Bates v. Dandy, 2 Atk. 206 ; Heath v. Hall, 4 Taunt. 327.
The property in the certificate having passed, by delivery, in the lifetime of Horace Putnam, its subsequent indorsement by his administrators could only have the effect to vest in the county the naked legal title to the instrument, the beneficial interest in which had already vested by his act. The legal title being a ban'en possession in the hands of the administrators, and to which the county was equita bly entitled, its investiture therewith could in no manner operate as a fraud upon his estate.
III. The warrant of the county auditor required by statute (S. & C. 1605, § viii) is not an assential condition precedent to the vesting of title in the county in any case. In devising a system of checks on the treasurer, the legislature deemed the auditor's warrant an efficient instrumentality for that purpose, by the registry of which, in the books of his office, the aggregate liability of the treasurer might be shown. But it is only proper to be employed in certifying into the treasury funds by which this aggregate is to be augmented, not those for the reimbursement of deficiencies in the aggregate, with which the treasurer already stands charged.
It was competent for Horace Putnam to have restored in money to the vaults of the treasury the five thousand dollars embezzled. Can it be seriously insisted that, without the previous warrant of the auditor, the title to the money so refunded would not have vested in the county ? We cannot understand why it should not. It could not have been necessary, or even proper, for any other purpose, for its registration in the books of the auditor, which it would have been his duty to make, would have shown the treasurer liable for the amount thereof in excess of the correct balance against him. But, without enlarging, it is sufficient to affirm that the auditor's warrant is an element in the statutory system of book-keeping devised for the protection of the funds belonging to the county, not*a muniment or condition of title in the county.
If, then, the commissioners had power to and did accept the transfer of said certificate in reimbursement of the deficiency in the treasury, the auditor's warrant was not necessary to vest the title thereto in the county, nor proper to charge the treasurer, he standing already charged with the amount it represented and was intended to replace.
IV. Did the commissioners exceed their powers in assuming to accept the transfer of the certificate in satisfaction and discharge of the treasurer's liability on account of his embezzlement ? In our opinion they did not. It may be1 laid down as a general rule, that the board of county commissioners is clothed with authority to do whatever the corporate or political entity, the county, might, if capable ot rational action, except in respect to matters the cognizance of which is exclusively vested in some other officer or person. Only what the county might not do, it may not, except as aforesaid. It is, in an enlarged sense, the representative and guardian of the county, having the management and control of its financial interests. The State v. Piatt et al. 15 Ohio, 15, 28 ; Carder v. The Com'rs &c. 16 Ohio St. 353, 369 ; Vankirk v. Clark et al. 16 Serg. & Rawle, 286, 290 ; 2 Wallace (U. S.) 501.
It cannot be contended that the county, if capable to act, might not, in any lawful way, adjust and accept satisfaction of a liability justly and legally due to it. Such was the liability of Horace Putnam incurred by his embezzlement. To satisfy that indebtedness the county might have invoked judicial process, or, in its discretion, have accepted, by amicable arrangement, anything of value in which commer cial payment is accustomed to be made. Certificates of deposit on banking houses of reputed solvency, are the lawful and frequent instrumentalities of such payment. The county, therefore, might well have accepted a transfer of such certificate in liquidation of Putnam's liability, without infringing any statutory inhibition or contravening the public policy of the State.
The commissioners, as representatives of the county, through whom alone it could act, had plenary power to do the same. By law they constituted the auditing board to which the treasurer was bound, semi-annually, to render his account. It was their province to ascertain, pass upon and settle his liability. The authority to settle, without the power to accept lawful payment in settlement, involves an incongruity. Horace Putnam having failed to make restitution in money, it was competent for him to effect it by the transfer of a certificate of deposit on the banking house of the plaintiffs in error ; and the acceptance thereof by the commissioners, without the warrant of the auditor, which it was within the scope of their powers to do, vested in the county the right to recover thereon, unless the transaction placed the county pari delicto, or made it particeps criminis in the embezzlement.
Y. Was the transaction between the commissioners and treasurer, at their semi-annual settlement in March, 1869, so tainted with illegality as to avoid the transfer of said certificate ? Counsel for the plaintiffs in error have urged this proposition with such earnestness that we have felt it our duty to bestow upon it the most careful consideration.
That a contract, in violation of law, or against public policy, or in furtherance of an object not within the power of the body assuming to exercise it, will not be judicially aided, is too.well settled for discussion. But, in our opinion, the principle has no application to the facts of the present case. The collection'of Putnam's indebtedness to the county was not an object excluded by law from the power of the commissioners, as was the railroad transaction which constituted the consideration of the contract in The Commissioners of Delaware county v. Andrews, 18 Ohio St. 49. It was not prohibited by any law, but, on the contrary, was enjoined upon the commissioners as an official duty. The transfer of the certificate was not in consideration of compounding the felony, but to make restitution of its fruits, to do which an obligation both legal and moral rested on the assignor.
How the doctrine of in pari delicto can be asserted of the commissioners, under the facts of this case, we are unable to understand'. Putnam's liability to the county was incurred without their knowledge. They neither created nor caused it. His embezzlement was not by their procurement or connivance. But if it had been otherwise, his liability to the county would not have been thereby affected, or its justice tainted. The commissioners might have become individually liable with him ; but his obligation to the county would have been uone the less, because they had assisted him to plunder its treasury.
But it is insisted, that the acceptance of the certificate by the commissioners, with knowledge of the embezzlement, on account of which it was transferred, was so far an assent to, and acquiescence in the crime, as to place the county in pari delido, thereby vitiating the transfer and avoiding recovery. To hold this would, in our opinion, establish a most remarkable doctrine. By it the commissioners would, in every case of criminal defalcation in the treasury, be precluded from securing restitution; for the acceptance of security to repair a defalcation, without having a knowledge of the existence and criminal origin of the defalcation itself, is a thing the possibility of which we cannot comprehend. The law enjoins upon them the duty of securing reparation whenever the existence of an occasion therefor comes to their knowledge. They cannot perform the duty without such knowledge. But, by this doctrine, the possession of knowledge essential to the discharge of their duty, instantly paralyzed their power to effectually discharge it, and makes them particeps criminis if they assume to do so. We are unwilling that crime shall have such immunity as the affirmance of this doctrine would furnish it.
Our attention has been especially directed to Wheeler v. Russell, 17 Mass. 257. That was the case of contract in plain coutrovention of penal and express statute. Its analogy to this case, either in principle or circumstances, is not perceptible.
We can discover no error in the rulings of the court below, and the motion for leave must be overruled.
Welch, C. J., and White, Day and McIlvaine, JJ.t concurred.