Court Opinion

ID: 3512610
Source: CourtListenerOpinion
Date Created: 2016-07-05 22:23:28.991208+00
Date Added: 2024-06-11T13:08:53.418802
License: Public Domain

Reargument has confirmed the views stated in the original opinion. We are charged with holding contrary to several cases. That is interesting, but neither as disconcerting nor as important as it *Page 197 
would be if we were accused of ignoring principles rather than decisions.
Quite naturally, the principal complaint is of our construction of the exception treated in subdivision number two of the opinion. The argument is for a literal construction so as to save the surety from liability for loss of moneys put into any kind of depository, however unlawful the choice thereof might be or however unfaithful the treasurer, principal in the bond, might have been in making the choice. There is no occasion for anything more than mention of the abundance of authority for the construction, not of contracts alone, but also of statutes and even constitutions, so as to accomplish the purpose of the document and avoid absurdity. In that process and to that end, literal meaning frequently suffers.
The argument for the surety insists on a blindfold against the light which is shed on the exception when the whole bond is applied to the subject matter. Every contract operates on matters extraneous to itself. So understanding of a contract is frequently difficult until it is considered in application to its subject matter. The contract here is concededly a fidelity bond — insurance bought and paid for by the city that its treasurer should in all things faithfully discharge his duties. Every deposit by him in the Marshall State Bank was a breach of fidelity. If the exception were literally construed, the bond would be rendered almost worthless, a result surely not intended.
But that is not all of the factual background. It was the duty of the city council properly to select a depository and to require from it the security demanded by the statute. In the situation so set up by statute and municipal practice, we find an obvious and legitimate field to be covered by an exception like that now in question. Giving the exception its full coverage over that field results in a reasonable construction, one not only permissible but proper when the whole bond is considered alongside its subject matter and in operation thereon. The literal rendition so strenuously argued for is much less reasonable and would go so far toward depriving the whole contract of any real value that we just cannot adopt it. *Page 198 
Now for the cases we are said to have ignored. They were not dealt with in the original opinion as perhaps they should have been, a situation which illustrates that it is sometimes a mistake to try to keep a judicial opinion within reasonable limits of bulk. The two cases of Murdo Township v. Townsend,56 S.D. 576, 229 N.W. 935, and Thunder Hawk School Dist. v. Western Surety Co. 58 S.D. 312, 235 N.W. 921, may be considered together because the latter simply follows the former. In both, the defaulting depository had been lawfully designated.
A more important distinction is that in the South Dakota cases the exception (apparently with direct reference to the fact that in South Dakota depositories may be selected either by the governing body of the municipality or by the treasurer) declared that it should apply [56 S.D. 578] "whether or notsuch banks or depositories were or may be selected ordesignated by the Principal or by other persons." (Italics as in original.) So decision was inescapable that the exception included loss in any proper depository however selected.
The other case stressed for the surety is City of Portageville v. Fidelity  Cas. Co. ___ Mo. App. ___,63 S.W.2d 411. The court, in the absence of any controlling pronouncement from the supreme court of Missouri, followed the South Dakota decisions above considered and cited School Dist. No. 1 v. Aiton, 173 Minn. 428, 217 N.W. 496. The involved exception, of liability [63 S.W.2d 412] "for any loss of public money deposited * * * with any bank," was given its literal meaning. There is no suggestion that the deposits were other than lawful. So there is absent from that case the important feature, present here, that every deposit was a breach of fidelity by the principal. Had it been possible to show the Missouri court that each of the involved deposits was not only a breach of duty but also a violation of positive law, there might well have been a different result.
A written contract is little more than a scrap of writing save as it operates with legal effect on matters extraneous to itself. Construction deals with the dynamic rather than the static phase of the instrument. The question is not just what words mean *Page 199 
literally but how they are intended to operate practically on the subject matter. Thus, seemingly plain language becomes susceptible of construction, and frequently requires it, if ambiguity appears when attempt is made to operate the contract. Wilmot v. Minneapolis A. Trade Assn. 169 Minn. 140,210 N.W. 861. This is such a case. The bond is fidelity insurance or it is nothing. It would be practically nothing if it did not cover the gross breach of duty which occurs under the statute when a municipal treasurer makes a deposit of public moneys which is prohibited by law. In a legal sense there is in such a case no "depository" but a mere receptacle.
In School Dist. No. 1 v. Aiton, 173 Minn. 428, 433,217 N.W. 496, similar limitation of the liability of a surety upon a school treasurer's bond was construed "as relating only to a depository" properly designated pursuant to statute. Here, as there, it may be said "the surety's contract was made in reference to a depository" within the contemplation of the statute. The surety's contract was made in reference to a "legal depository." It is unthinkable that parties to such a contract, particularly public officers, would contemplate the unlawful rather than the lawful. We cannot suppose, therefore, that any of the language of Gregoire's bonds intended to deal with or provide for an illegal depository.
As to the other principal question, whether the wrongful deposits were a proximate cause of loss, what has already been said in support of our affirmative conclusion is either self-sustaining or its weakness so apparent that the statement is self-destructive.
There is nothing in our two decisions of the Aiton case,173 Minn. 428, 217 N.W. 296, 175 Minn. 346, 221 N.W. 424, in conflict with our present views. The important thing there was that the bank, although not eligible to be a depository, had become one de facto and had furnished the security required by the statute, which was available to the school district. That explains the holding, in the district court, that the bank's failure, rather than the deposits, caused the loss. In urging that decision upon us so strongly counsel seem to forget that there we declined (173 Minn. 433) "to pursue this branch of the case" because consideration of it was not *Page 200 
necessary to a decision. When the Aiton case was here the second time, it was said (175 Minn. 350-351) "the theory of plaintiff that every deposit * * * was a conversion was rejected." Why? Simply because, "when a deposit was made in the bank the surety was relieved as long as it remained therein." This case is diametrically the opposite at that point because Gregoire's every deposit was a conversion and he was not "relieved." In School Dist. No. 13 v. Nissen, 177 Minn. 479,480, 225 N.W. 444, the statement that "the loss to the district resulted solely from the failure of the bank" was true only in the same ultimate sense that it is here; that is, if the bank had not failed there would have been no loss. It was not meant otherwise.
We adhere to our original decision except as now to be indicated. The judgment will stand as against defendant Gregoire. The case will go back for a new trial of all the issues raised by the defense of the surety, United States Fidelity  Guaranty Company, subject, of course, to the views expressed in this decision. On the reargument some question was made as to the extent of the liability, in amount, under each of the three bonds. The facts necessary to settle that issue need to be found. As yet they have not been, and it is not our function to ascertain what they are. We take it that not much new evidence will be needed.
The case will be remanded for further proceedings not inconsistent with this decision.
So ordered. *Page 201