Court Opinion

ID: 6689426
Source: CourtListenerOpinion
Date Created: 2022-07-20 21:36:22.387462+00
Date Added: 2024-06-11T16:01:04.050413
License: Public Domain

POULEY, J.
(dissenting). I believe the order sustaining the demurrers should be affirmed. It is true, as stated in the majority opinion, that the demurrers of the defendants do not present the question of plaintiff’s right to equitable relief; still I believe the demurrers should be sustained on the ground that the tacts stated in the complaint do not entitle plaintiff to any relief whatever.
That the defendant iSchamber received considerable amounts of money from the various banks for the use of funds belonging to the state is not only admitted by the demurrer, but it was a matter of common, knowledge, at the time Schamber was in office, that the various state treasurers, including said defendant, had been receiving and appropriating to their own use interest on state funds since the adoption of the Constitution. Such practice was continued until the year 1909, when the Legislature enacted a state depositary law creating a board of finance, providing for the designation of certain banks to act as state depositaries, requiring the payment of interest on state funds deposited in such depositaries, releasing the treasurer from liability for loss occasioned by the failure or insolvency of such depositary banks, requiring the treasurer to account to the state for all interest collected on said funds, and making it a felony for him to make any profit, directly *507or indirectly, out of any money belonging to the state. Chapter 229, Raws of 1909.
The right of state treasurers and other custodians of public funds to receive and appropriate to their own use interest on such funds while in their custody has been contested in the courts of several of the states in recent years, but the conclusions reached by the various courts are far from uniform. The extent of the treasurer’s liability has been the controlling feature with some of the courts, holding that, where the treasurer is absolutely liable or an insurer of the public funds that come into his hands, he is not liable for any interest that may be paid to him for the use of such funds; but that, when his liability is only that of a trustee or bailee, he should account for any interest or other increment that may be earned by any such funds while in his custody. Commonwealth v. Godshaw, 92 Ky. 435, 17 S. W. 737; Renfroe v. Colquitt, 74 Ga. 618; Maloy v. Bernalillo Co. Cob., 10 N. M. 638, 62 Pac. 1106, 52 L. R. A. 126; Eshelby v. Cincinnati Bd. of Ed., 66 Ohio St. 71, 63 N. E. 586; Rhea v. Brewster, 130 Iowa, 729, 107 N. W. 940, 8 Ann. Cas. 389. Other courts hold that a treasurer is liable for any interest received by him on public funds whether he is absolutely liable or not. United States v. Mosby, 133 U. S. 273, 10 Sup. Ct. 327, 33 L. Ed. 625; State v. McFetridge, 84 Wis. 473, 54 N. W. 1, 20 L. R. A. 223; Adams v. Williams, 97 Miss. 113, 52 South. 865, 30 L. R. A. (N. S.) 855, Ann. Cas. 1912C, 1129. Again, other courts hold that a treasurer becomes vested with the title to a public fund when it comes into his hands, and that it is not a matter of concern to the public what use is made of it while in his hands or how much it may earn by way of interest; that, when the principal is accounted for, the treasurer’s liability ceases. Rock et al. v. Stinger, 36 Ind. 346; Shelton v. State, 53 Ind. 331, 21 Am. Rep. 197. A review of these cases will not be attempted. They have all been collected and reviewed in Adams v. Williams, 97 Miss. 113, 52 South. 865, also in a note appended to that case, where it is reported in 30 L. R. A. (N. S.) 855, Ann. Cas. 1912 C, 1129, and further comment upon them would be superfluous.
A 'determination of the defendant’s liability in this case depends upon, or at least requires an examination of, our Constitü*508tion and the statute law in force at the time the alleged liability accrued. Section n, art. n, of our Constitution provides that:
“The making of profit, directly or indirectly, out of state, county, city, town or school district money, or using the same for any purpose not authorized by law, shall be deemed a felony and shall be punished as provided by law.”
While this section of the Constitution declares the making of profit out of state money to be a felony, it provides no penalty for its violation. Therefore it remained inoperative until the Legislature should prescribe a penalty. By section i, c. 152, Laws of 1895, it is provided that:
“All moneys belonging to the state, deposited in banks by the state treasurer, shall be deposited not to his credit as an individual, but in his name as state treasurer, and not otherwise.”
This law recognizes, the right of the treasurer to keep the state funds deposited in banks, but it studiously avoids the fixing of a penalty for a violation of section n, art. 11, of the Constitution, and it just as studiously avoids prohibiting the treasurer from collecting and retaining interest thereon. Section 1 of chapter 106, Laws of 1897, authorized the state treasurer to designate certain banks to act as depositaries of the state funds. Section 2 required that such depositaries should, before receiving any of the public funds, furnish security for the safe-keeping of the same, and section 7 of said chapter provides that:
“Nothing in this act contained shall’ be held or construed to relieve the treasurer or his bondsmen from any liability on the said treasurer’s official bond or [to] reduce the amount thereof or in any way impair the obligations of the same.”
Section 4, c. 104, of the same session provides that:
“The making of profit, directly or indirectly, by the county treasurer out of any money in the county treasury, the custody of which the treasury is charged with, by loan or depositing or otherwise using or depositing the same in any manner. * * * shall be deemed guilty of a felony, and upon conviction thereof”
—shall be punished, etc. It will be noted that this act applies to county treasurers only, and it will be further noted, upon an examination of both of these acts and of chapters 105 and 107 of the same session, all of which relate to the safe-keeping of public funds, that nothing therein contained prohibits the state treasurer *509from receiving and retaining interest on the state funds or provides a penalty for doing the same. A comparison of these acts of the Legislature is instructive. Chapter 104, Laws of 1897, requires the county treasurer to designate county depositaries of the county funds, requires such depositary to furnish security for the safe-keeping of such funds, authorizes the collection of interest thereon for the use of the county, provides a penalty for the making of profit thereon by the treasurer, and releases said treasurer from liability on his bond in case the provisions of the law have been complied with. Chapter 106, Laws 1897, authorizes the state treasurer to designate state depositaries and to take security for the safe-keeping of the state funds. It does not require him to collect interest for the use of the state on such funds, nor does it prohibit him from collecting and retaining interest thereon; and it is expressly provided by section 7 that nothing in the act contained shall be held or construed to relieve the treasurer or his bondsmen from any liability on his official bond or to reduce the amount thereof.
From the course pursued by the Legislature, as indicated by the enactment of the foregoing statutes, and in view of the fact that every member of the Legislature knew that the state treasurer was receiving and retaining interest on the state money,' and that they had been doing so since the adoption of the Constitution, but one conclusion can be drawn, and that is that the Legislature •intended that, in consideration of the great responsibility assumed by the state treasurer, he might continue to receive and retain interest on such funds. Such a course had been sanctioned by the Legislatures and Supreme Courts of several of the states. What has usually beeen regarded as the leading case in support of the treasurer’s right to receive and retain interest on public funds is State v. Walsen, 17 Colo. 170, 28 Pac. 1119, 15 L. R. A. 457. Defendant in that case had been state treasurer, and he had received interest on the public funds. Such interest was not accounted for, and the action was prosecuted by the state for the recovery thereof. Section 13, art. 10, of the Constitution of Colorado is as follows:
“The making of profit, directly or indirectly, out of state, county, city, or school district money, or using the same for any *510purpose not authorized by law, by any public officer, shall' be deemed a felony, and shall be punished as provided by law."
This, in effect is identical with section n, art. II, of' our Constitution. In 1889 the Legislature of Colorado enacted a law (Laws 1889, p. 297) similar in effect to section 4, c. 104, Laws of 1897, which, like section 4, c. 104, Laws of 1897, made no reference whatever to state funds. Of this law, the Supreme Court of Colorado, in State v. Walsen, supra, said:
“That this omission was purposely made is, apparent from the circumlocution employed to cover all other offices and all other public funds.
And, in the same case, that court further said:
“From what has been said, it is apparent that both the legislative and judicial departments of the government have construed the Constitution as requiring additional legislation in order that the state could recover interest. This construction has, from the first, been adopted -by the officers of the executive department and successive governors have, in their public messages, urged upon the legislative department the necessity for suitable legislation upon the subject.”
The court held that the state was not entitled to recover the interest.
Renfroe v. Colquitt, 74 Ga. 618, was an action by the state of Georgia for the recovery of money that had Toeen paid to defendant as interest on the public funds while holding the office of state treasurer. The Constitution of Georgia contained a provision similar in effect to, section 11, art. 11, of our Constitution, making it a felony for the treasurer to make a profit out of the state money. The court in that case 'held that the interest involved was not received by the defendant by virtue of his office, but in violation of the law, and that the state was not entitled to recover. In State v. Kimball, Wils., 174, the state of Indiana attempted to collect from the state treasurer money that had been paid to him as interest on the public funds while he was holding the office of state treasurer. There was a law in force in Indiana at that time which made it a felony for the treasurer to recive any interest or bonus for the use, loan, or deposit of the state funds. The court held that the state had no right of recovery against the treasurer *511or his bondsmen. In the course of the opinion in that case, the court took occasion to say:
“By accepting the office, and entering upon the duties of the same, the treasurer assumes all the obligations incident to a faithful, and honest discharge of -those duties, and the object to -be attained by the execution of the official bond' is that the state may have the undertaking of others as sureties for the treasurer, and while the sureties in suc-h case are liable upon the bond in all cases where the principal Is clearly liable, they are nevertheless-sureties, and ought not to1' have their obligations extended by doubtful construction beyond the terms of the law, and the bond or contract which they have entered into. It is not necessary to cite authorities in support of this well-recognized rule of law. When all the funds, which by -the terms of the law are properly in the hands of the treasurer, have been fully accounted for, and paid over, to hold the parties liable for other funds that have been acquired in violation of law, and in acquiring which the treasurer may be prosecuted in criminal actions, is extending the terms of the bond beyond anything that the parties could reasonably be held to contemplate at the timé of its execution.”
The above language is peculiarly applicable to the facts that existed at the time defendant 'Schamfoer was in office.
State v. Walsen, supra, was published in 1892. The material facts in that case were identical with the facts in this case, and the statute in force in Colorado was identical in effect with the provisions of section 11, art. 11, of our Constitution. The rule laid down in State v. Walsen was accepted as the law in this state.
All of defendant’s predecessors in office, since the adoption of the Constitution, had received '-and retained interest on the public funds. In fact it was well known that such interest was ■the inducement to accept the office and assume the financial responsibilities incident thereto. The sureties on the treasurer’s bond executed such bond with the understanding that the treasurer was to have whatever interest he might collect for the use of the public money, and also with the understanding' that, when the treasurer had accounted for all the funds that came into his hands from the state, his liability, and theirs as well, was at an end.
*512It is not out of place to say that the right of the state treasurer to falce interest on the state funds was a subject of common .discussion throughout the state when the defendant Schamber took his office, in January, 1899. At the convening of the Legislature in January, 1899, the Governor of the state, in his message to the Legislature, notified that body that the state treasurer who immediately preceded Scham'ber 'had received and retained more than $50,000 in interest on state funds during his incumbency in office. As appears from the correspondence in the offices of t.he Governor and the Attorney General, the Attorney General was called upon for an opiinon as to the right of the treasurer to take interest on the state founds. In a lengthy and carefully prepared communication, the Attorney General reviewed the law and the decisions from the other states, and expressed the opinion that the state was not entitled to such interest. He appears to have convinced the Governor that such was the law, for no. steps for the recovery of said interest were taken; and, at the convening of the following Legislature, the Governor recommended the enactment of' a depositary law, providing for the collection of interest on the state funds for the use and benefit of the state.
State v. McFetridge, 84 Wis. 473, 54 N. W. 1, 998, 20 L. R. A. 223, is a case brought by the state of Wisconsin for the recovery of interest on state funds that had been collected by the defendant while state treasurer. The court held that the state was entitled to' such interest. This is regarded as the leading case in support of such right. But the Wisconsin court distinguishes the Walsen case because of the statutory and constitutional provisions in force in Colorado, and our attention has not been called to any case from a state where they have' a statutory or constitutional provision similar to those in force in this state and in Georgia, Indiana, and Colorado in which the state has been allowed to recover.
It may have been wrong from a moral standpoint, and criminal under the Constitution, for the treasurer to. take and appropriate • to his own use interest on the public funds, and it may be that the treasurer had no legal right to retain such interest after it had been collected, but the state has shown no. 'better right *513to -it and, under the law as it was. at the time Schamber was treasurer, the state is not entitled- to recover.