This is an action against a surety upon a depositary bond furnished a county. Trial was had to the court without a jury. Defendant has appealed from a judgment in plaintiff's favor and from an order denying a new trial. The material facts are: — On Jan. 7th, 1919, the plaintiff county accepted a depositary bond in the sum of $30,000.00 furnished by defendant Trust Company in behalf of the First National Bank of Towner, N.D. which had been designated as the legal depositary of funds of plaintiff county. The conditions of said bond read, — "If the said bank is designated one of the depositories of said county under the provisions of said §§ 3315-3329 of the 1913 Compiled Laws of North Dakota, and shall safely keep and repay, according to the letter and intent of said sections, any and all funds deposited with it, subject to draft on demand, together with interest thereon at the rates specified in said application or proposal, then this obligation to be null and void, but otherwise to be and remain in full force and effect." From Jan. 7th, 1919, to July 1st, 1919, the balances of plaintiff county in the First National Bank varied from about $3,000.00 to $120,000.00. On Feb. 25th, 1919, a statute was enacted which required all county funds to be deposited in the Bank of North Dakota within three months from the passage and approval of the act subject to certain provisions providing for postponement of such deposits in the Bank of North Dakota. Laws 1919, chap. 147. The Bank of North Dakota started to function as such in July, 1919. From July 1st, 1919, to March 9th, 1920, the deposits of the county in the Towner bank varied from about $43.00 to $11,000.00. On April 6th, 1920, the deposits of the county in the Towner bank (pursuant to the ledger sheet) were slightly over $75,000.00. Such deposits then declined until on June 8th, 1920, they amounted to $142.58, since which time they have remained the same. After the Bank of North Dakota started to function the county treasurer of plaintiff, with the approval of the County Commissioners, made an arrangement with two banks in Towner, North Dakota, to facilitate the making of deposits by the county in the Bank of North Dakota. In alternate months the county treasurer would take to the First National *Page 664 Bank of Towner checks, drafts and other cash items and would secure in exchange therefor a cashier's check payable to the county treasurer. This cashier's check would then be forwarded to the Bank of North Dakota for deposit. The First National Bank would forward the items received from the County Treasurer to its correspondent bank and would receive credit therefor and remuneration at the rate of 2 1/2% on daily balances for a period of some seven or eight days or more usually required before such cashier's check was presented for payment. This arrangement avoided the trouble and annoyance of sending small items by the county treasurer to the Bank of North Dakota and was profitable to the bank through the interest received by it upon its credit with the correspondent bank.
On Nov. 2d 1920, § 7 of chap. 147, Laws of 1919, was amended and re-enacted through an initiated law so as to eliminate the requirement that county funds should be deposited in the Bank of North Dakota. This act became effective on Dec. 2d 1920. Between Dec. 2nd, and Dec. 15th, 1920, the County Treasurer left with the First National Bank, pursuant to the arrangement made, various cash items, checks, etc., and received various cashier's checks therefor amounting to a total sum of $14,796.79. These cashier's were sent to the Bank of North Dakota; in due course they were presented but not paid. On Dec. 20th, 1920, the First National Bank became insolvent and went into the hands of a receiver. Defendant did not at any time cancel its bond thus given to plaintiff. In January, 1921, the State's Attorney made demand upon the defendant company for payment of the balance remaining in the checking account and also for the amount of the cashier's checks unpaid. Defendant offered to pay the balance in plaintiff's checking account. Upon the refusal of its offer by plaintiff, defendant deposited such amount in a bank to plaintiff's credit. In May, 1921, pursuant to resolution of the county commissioners, the state's attorney was authorized to commence this action. It was commenced on May 12th, 1921. The trial court found that the plaintiff deposited with said First National Bank between Dec. 2nd, and 15th, 1920, the said sum of $14,796.79, pursuant to the terms of the bond, and that the bank received such amount and agreed to repay it to plaintiff upon demand; that such deposit was made in reliance upon and with full faith and credit in the protection of such bond and that such *Page 665 deposit would not have been made excepting for such bond; that defendant permitted such bond to remain in force and not cancelled during all the times when such monies were deposited and thereby lead plaintiff to make such deposit and leave its funds with said bank.
In a memorandum opinion the trial court held, generally speaking, that in view of the agreement made between the banks and the officials of the county, the items of funds thus left with the bank constituted a deposit and was so understood by all the parties; that thereby the bank secured the use of such deposits, interest free, until they should be transferred elsewhere either by cashing the cashier's checks through the county itself or through its assigns, thus affording to the bank nearly a two week's average use for such county funds; that these acts involved a free collection service in return for the free use of the money so collected and a leaving of county money with the bank for safe-keeping subject to order and payable, not in the specific sum deposited, but in an equal sum; that these funds so left were payable upon demand, not by some other institution on which it had issued its draft or order, but upon demand being made over its counter on presentation of its own checks or drafts issued by itself on its own general funds. Further, that in any event the bond was in force and effect after the initiated law became effective and that defendant is not in a position to assert that its bond was not then in force.
Contentions. Defendant has made some 47 specifications of error involving rulings of the trial court and sufficiency of the evidence to justify the trial court's findings. Defendant asserts that the record facts prove that there was not a deposit made within the conditions of the bond but simply an exchange of checks, drafts and other cash items for the cashier's check of the First National Bank; that the transaction in this regard did not constitute a deposit but merely a purchase of the cashier's check; that the bond covers simply what is commonly known as a checking account and the bond was conditioned to repay money deposited in such checking account subject to draft upon demand; that the depositary law, pursuant to which the bond was given, was impliedly repealed by chap. 147, Laws of 1919; and consequently the bond became inoperative *Page 666 and did not cover deposits subsequently made in the First National Bank.
Particularly defendant contends that the depositary law covered simply two clauses of deposits; demand deposits and time deposits, not special deposits; that the law does not include acts of the bank as collection agent nor does it cover liability on the part of the bank upon its cashier's checks; that this deposit or transaction does not come within the commonly accepted definition of the term "deposit," or within the contemplation of the statute or the condition of the bond.
Plaintiff, on the contrary, contends that the deposit was a general deposit; that the cashier's checks were drafts on general funds received by the bank on general deposit; that the bond was never cancelled but was kept as a protection to the county; that the county made deposits in full reliance upon the bond and that defendant is estopped to deny the sufficiency of the bond or liability thereupon.
Opinion. Two general questions are presented: —
(1) Was the bond given by defendant in effect when the bank became insolvent?
(2) Were the transactions of the plaintiff county with the bank, concerning the issuance of cashier's checks deposit transaction, within the purview of, and covered by, the bond issued?
We are of the opinion that the first question must be answered through the initiative act of Nov. 2d 1920, and the amendment thereof, in the affirmative. Chapter 149, Laws 1919 (The Bank Act) did not expressly repeal the statutory provisions (Comp. Laws 1913, §§ 3315-3329) theretofore existing concerning legal depositaries. This court has heretofore indicated that they did not impliedly repeal such sections (3315-3329) in certain respects concerning the continuance of depositary bonds in force when the bank act became effective. State ex rel. Kopriva v. Larson, 48 N.D. 1144, 189 N.W. 626. We are clearly of the opinion that defendant, in any event, is estopped to deny the continuance of its bond. It is conceded that ever since the Bank Act or its amendment became effective the bank had upon deposit some county funds of plaintiff. Defendant in no manner sought to cancel or *Page 667 withdraw its bond. In this action it has tendered the amount necessary to pay the amount of such county funds which so remained upon deposit and which are clearly within the terms of its bond. Presumably, defendant has continued to collect its annual premium for such bond.
The second question presents more difficult considerations whether viewed in the light of adjudicated cases or through analytical reasoning. To protect the defendant from liability, reliance is placed upon the original statutory provisions, Sections 3315-3329, Comp. Laws 1913, providing for legal depositaries. It is ably and strenuously urged that these provisions of law must be read into, and considered with, the bond when it is sought to ascertain the contract made and the extent of its coverage concerning county funds. Thus, the claim is made that these provisions contemplate the receiving of proposals for, and the acceptance and approval of, depositary bonds for the following purposes only, namely, — for county funds to be placed in a checking account in a legal depositary upon which checking account interest shall be paid, and, for county funds placed upon time deposits. These statutory provisions provide that the bond shall be conditioned for the safe-keeping and repayment of any and all funds deposited in a bank, acting as a legal depositary. Comp. Laws 1913, § 3317. The bond in question was conditioned for the safe-keeping and repayment of any and all funds deposited subject to draft upon demand. We are clearly of the opinion that, although the statutory provisions quoted are to be considered in interpreting the contract made in the bond and, in some respects, pursuant to the terms of the bond, form a part thereof, yet, the failure of the bank and the county to proceed with exactness under the statute does not abrogate the terms of a bond covering specific deposits. Thus, the failure of the county through proposal, or otherwise, to require, or, the failure of the depositary to pay, interest on an open checking account, would not abrogate the liability of a depositary bond securing the payment of such checking account. In other words, a bond furnished and accepted for the purpose of securing a deposit of county funds, and acted upon by the deposit of county funds, is a valid obligation regardless of the lack or absence of initial formalities in the proposing, furnishing and accepting of the same. A bond, so furnished and accepted, may be valid as a common law obligation, when acted upon by the parties, even though it does not observe nor follow statutory *Page 668 requirements. See Dickey County v. Gesme, ante, 272,199 N.W. 873.
The pertinent question, devoid of technicalities, therefore, is whether the transactions involved in the issuance of the cashier's checks constituted in law a deposit of county funds and as such covered by defendant's bond. It is clear that these transactions did not constitute a deposit upon any checking account in the usual or ordinary acceptance of the term. It is evident that these transactions were not entered upon the books of the bank as a deposit of county funds in plaintiff's favor in the ordinary and usual acceptance of the term. An unusual situation arose. The bank had been a legal depositary of plaintiff. Defendant furnished a bond to the county for such bank. Pursuant thereto, the bank had on deposit for a considerable period of time large amounts of county funds. Then, in February, 1919, the Bank Act was adopted as an emergency act. It required county funds to be deposited in the Bank of North Dakota. But, it required time for the Bank of North Dakota to organize and to be put into operation as a bank. In the meantime, county funds in large amounts remained upon deposit in the bank secured by defendant's bond. Along in July, 1919, as the Bank of North Dakota started to function, withdrawals from the bank involved were made and deposits of county funds of plaintiff were then made in the Bank of North Dakota; nevertheless, the bank retained a deposit of plaintiff's funds in the sum of $171.00; but a little later, so far as ledger record of the bank discloses, some deposits were made of plaintiff's funds in the bank involved; these are explained to be temporary deposits such as seed and feed lien monies; nevertheless, they appeared as deposits to plaintiff's credit; then, later, on Nov. 2d 1920, the Initiated Act was adopted; it became effective Dec. 2d 1920 . In abrogated the requirement that all county funds must be deposited in the Bank of North Dakota. However, plaintiff continued to deposit county funds in the Bank of North Dakota. It employed this method of securing cashier's checks to make its deposits of county funds in the Bank of North Dakota. Its cash, its checks, its money orders, as received, it took to the bank; it made a list of the items; it received from the bank a cashier's check for the amount of such items; these cashier's checks were transmitted by plaintiff to the Bank of North Dakota; so far as the record shows, some of these cashier's checks were received by the *Page 669 Bank of North Dakota two days after their issuance; some of them four to six days, or longer; plaintiff became and was responsible for any items so given the bank which were not paid; in such event, it took them back and paid the amount thereof; the bank did not keep these items in a special way; as usual with such items, the bank transmitted them to its correspondent bank; it received credit for them; they served to swell its deposit account with such correspondent bank; thereupon, it received a compensation upon its daily balance; thus, it received remuneration; thus, the bank had, continuously, an interval of time between the issuance of its cashier's checks and its payment, averaging from one week to two weeks, when it had on hand, in cash items, or, to its credit in the correspondent bank, the amount of the items representing such cashier's check. How are these transactions to be characterized? Are they to be termed transactions of deposit or transactions of purchase? Did the county buy and intend to buy, daily or frequently, thus, the credit offered by the bank's promise to pay? Or, did the plaintiff intend to deposit its county funds in the bank, temporarily, and the bank intend so to receive such funds; and, in evidence thereof, the plaintiff to receive, and the bank to give, a cashier's check, negotiable in form, and readily acceptable upon final deposit in the Bank of North Dakota? If, in these transactions, the bank had issued a demand certificate of deposit, the answer to these questions might be readily made. Plaintiff asserts that its intention is clearly disclosed in the evidence. It made the arrangement with the bank relying upon the bond of defendant and such was the intention and understanding of plaintiff and the bank. Accordingly, so the county commissioners and other county officials arranged. Of course, following such intention thus expressed, the transaction was a deposit; if the intention were otherwise, manifestly it is not covered by the bond: But defendant maintains that it was not a party to this intention or understanding and the bond may not thus be enlarged. Upon the precise questions proposed counsel have quoted many authorities concerning what constitutes a deposit. It will serve no useful purpose to review the authorities quoted or attempt to precisely define the term "deposit." In a definitional way the term may vary in accordance with application, custom and usage. Concerning the status to be given the transactions in question, defendant relies on the case of Widman v. Kellogg, 22 N.D. 396, *Page 670 39 L.R.A.(N.S.) 563, 133 N.W. 1020, and plaintiff, upon the case of Minnesota Mut. L. Ins. Co. v. Tagus State Bank, 34 N.D. 566, L.R.A. 1917A, 519, 158 N.W. 1063. In the former case, plaintiff, an express agent, took the funds received by him daily, to a bank and purchased a draft therefor. The bank failed; the drafts were not paid. Plaintiff in that action sought to create a preference for the funds involved and to create the bank as a trustee ex maleficio. The court upheld a preference. This court found that the plaintiff in that case did not keep a deposit account with the bank; that he took his day's receipts to the bank and received in exchange therefor drafts; that the funds were deposited in the sense that they went into the bank but not for the purpose of checking against them or for being placed to his credit. It must be noted that these funds "so deposited" (using the term advisedly) by plaintiff in that case were recognized by this court as "funds deposited" which were entitled to be safeguarded and subjected to a trusteeship ex maleficio.
In the latter case (34 N.D. 566, L.R.A. 1917A, 519, 158 N.W. 1063) an insurance company sent to Tagus Bank two notes for collection; the amount of the notes was paid to Blaisdell Bank with instructions to send the amount to the Tagus Bank; the Blaisdell Bank sent its cashier's checks for the amount; the Tagus Bank received and cashed the cashier's check and issued its own cashier's check payable to the insurance company; its cashier appropriated for his own use such cashier's check; the Tagus Bank claimed that the funds were on special deposit; this court denied this claim. This court said: —
"Decision of any question that would arise under a bailment is without the case because the facts stipulated show that no deposit was made with defendant's bank. It had authority to collect and procured collection of these notes. It reduced to cash the checks sent it by its collecting agent, the Blaisdell Bank. In possession of the funds, it became charged with a duty to remit said amount less commissions for its services. It placed these funds on deposit with itself. This is shown by the issuance of its two cashier's checks, which are equivalent to its draft on its general funds, and negatives to the mind of anyone familiar with banking usage any possible contention that these funds were placed on special deposit. The issuance of cashier's checks, necessarily drawn generally against its cash, evidenced that the other side of its *Page 671 bookkeeping transactions had taken place, viz., that the sums had been deposited in its cash as general deposits subject to check. The purpose of the transaction was to swell its deposits temporarily, and that it might retain the funds until its cashier's checks returned for collection. Otherwise it would have drawn its draft on its correspondent bank and credited its cash with the sums deposited. In either event the effect is the same, except that by its system of cashier's checks it retained the money temporarily pending return of its checks for collection. In either case no relation other than that of debtor and creditor would be created."
Judgment for recovery was upheld.
After full consideration we are of the opinion that the transactions involved herein created the relation of debtor and creditor; they were not transactions upon special deposit, as the term in banking circles is considered; that the transactions may not be classed as a transaction of purchase; particularly so in one respect, for the reason that the items so left with the bank could be turned back to plaintiff and payment secured from plaintiff just the same as if they had been deposited to plaintiff's credit upon the bank's books; that the essence of the transaction may justly be regarded as a deposit and as such subject to the terms of defendant's bond. Otherwise, defendant claims that the failure of plaintiff to present its claim properly to the receiver served to prejudice its rights. Without full discussion of this aspect of the case, we are convinced that defendant in no manner suffered prejudice by plaintiff's action. The judgment should be affirmed.