People ex rel. Board of County Commissioners v. Koenig

Mr. Justice Hilliard

delivered the opinion of the court.

An action by the people, on relation of the board of county commissioners of the county of Jefferson, to recover from, the county treasurer, Koenig, and Fidelity and Deposit Company of Maryland, surety on his official bond, the sum of a balance to the credit of the county with Kountze Brothers, a failed New York banking copartnership, for which the treasurer and surety, disclaiming liability, refused to account. The defendants had judgment at trial.

In all essentials the controversy parallels Patterson v. People, ex rel., 98 Colo. 86, 53 P. (2d) 1187, where our decision was favorable to the county. Here, as there, the county treasurer kept an account with Kountze Brothers from which the depositary paid school district bond obligations made payable there, whenever presented. Here, as there, and for like purpose, a long line of county treasurers had deposited money with Kountze Brothers, and as in Patterson’s county (Weld), so here, the board of county commissioners throughout all the years of such custom had knowledge thereof; and here, as there, the account with Kountze Brothers stood in the name of the county. Here, as there, when remitting to Kountze Brothers the treasurer did not make a charge against the several school districts, nor did Kountze Brothers credit it so on receipt. On the contrary, the item was carried on the treasurer’s books as a county deposit -with Kountze Brothers, and correspondingly on their books. Here, as there, the treasurer did not debit the school districts, with each of which he kept a separate account, until receipt from Kountze Brothers of cancelled district obligations, and Kountze Brothers charged its items of disbursements to the general account of the county, as and when made, and not to the several school districts the coupons on the bonds of which it paid.

It is urged, however, that because, pursuant to section 8366, C. L. 1921, certain school districts of Jefferson county had made their bond coupons payable at the banking house of Kountze Brothers in New York, the. treasurer of the county was bound to keep funds on deposit with that institution to meet such obligations as they matured and were presented for payment. We. are not of that view. Since there is no express statutory requirements to that end, which is frankly conceded, we think that in no responsible sense can the county treasurer be concerned about the place, the manner, or the. fact of payment of school district obligations. Of course, by virtue of his office the county treasurer collects tax levies made by or for the school districts of his county, and is required to credit each district with collections made for it, but his only further duty is to make disbursement on warrants or orders drawn by school district officers. §§8301, 8302, C. L. 1921. School districts and their boards are solely responsible for the creation of district debts, and the time, manner and place of payment is of their uncontrolled action. They discharge their obligations by means of orders or warrants drawn against funds to their credit in the county treasury. If, through making certain coupons payable at Kountze Brothers in New York and others there or at the county treasury at the option of holders — both conditions obtaining' here— uncertainty should arise as to when or in what sum their warrants should be drawn, the county treasurer may not relieve the school districts of their embarrassment by making a general deposit of county funds with some depositary to which the school district creditors may resort for payment of due obligations, as was done here, and escape the consequences should the depositary fail, as eventuated in this instance.

But it is contended that the county treasurer had a responsible care for the credit of school districts in his county having obligations payable in the circumstances of the record here, constituting their agent indeed, and, premised so, not only was he legally justified in making the deposit of funds in the New York bank, the failure of which worked discomfiture, but in the interest of the districts was bound to do so. We cannot think that position is sound. Only incidentally, if at all, does a county treasurer know of school district indebtedness and how or where it is to be paid. The credit of such an entity, important of course, as well as the burden of the ways and means of its protection, rests with itself and its board. In whatever view considered, therefore, as we think, when the county treasurer deposited county funds with Kountze Brothers he acted gratuitously, and since loss attended his unauthorized action, the situation is controlled by the Patterson decision and the Colorado cases there cited.

We do not regard as sound the view that an exception exists in relation to those school districts which made their coupons payable only at the banking house of Kountze Brothers, and that in forwarding money to it, in the circumstances here, so far as required to meet those particular coupons, the treasurer was justified. For accounting purposes, as we have uniformly held, all money, state, county, school district, and whatever, collected by a county treasurer, as such, belongs to the county. Patterson v. People ex rel., supra; Cooper v. People, 28 Colo. 87, 63 Pac. 314, cited in Bell v. People, 92 Colo. 585, 22 P. (2d) 857; McClure v. La Plata County, 19 Colo. 122, 34 Pac. 763. Here, the sum of the net credits of all the activities for which the treasurer makes collection, as shown by his books, exceeded exhibited vouch ers and what he had in hand by the amount sought to be recovered, $1,927.41. He had neither school board warrants nor cancelled coupons to cover the sum, and had not made, debits to the accounts of school districts for any part thereof. He was frank to say that the sum involved was the balance of a deposit he carried in the Kountze Brothers institution, which had failed. Considering that by our decisions a county treasurer is held strictly accountable for the public money collected by him, the failure of banks in which he has deposited funds and with whatever faith, constituting no defense (Gartley v. People, 24 Colo. 155, 49 Pac. 272; Gartley v. People, 28 Colo. 227, 64 Pac. 208; McClure v. La Plata County, supra), the treasurer here must be held to bear the burden resulting from the failure of a banking institution which he trusted, and the rule applies to the entire sum. He did not pay coupons with the money sought to be recovered — indeed, as we have seen, he did not even charge it to the school districts. In the circumstances here, section 1, chapter 83, S. L. ’27, which requires county treasurers to deposit public funds “in one or more responsible banks located in the State of Colorado” works no change in the doctrine. The treasurer first deposited the money as required by that act, and no loss resulted. The loss came through his withdrawal of funds from a Colorado bank, deposited in his name as treasurer, and the redeposit thereof in like manner in a New York bank, which failed. But were we persuaded to the view that a distinction exists between coupons definitely payable at Kountze Brothers and those payable there or at the county treasury, it would not be helpful to the treasurer here. The total of coupons made payable at the Kountze Brothers bank, and there only, and paid, amounted to $5,134 for the entire period of the inquiry, while the deposits for the same period aggregated over $28,000.

The sole assignment of error, being general only, may be said to be insufficient under our rule 32, as emphasized by counsel for defendants in error, but in view of the public nature and importance of the major question involved, we have elected to proceed under rule 35, which is to the effect that in our discretion we may notice any error appearing of record.

In fairness to those concerned we observe that the judgment of the trial court was given prior to our pronouncement in the Patterson inquiry.

Let the judgment be reversed, the trial court to enter instead the judgment prayed for in the complaint.

Mr. Chief Justice Campbell, Mr. Justice Burke and Mr. Justice Young concur.

Mr. Justice Butler concurs in part and dissents in part.

Mr. Justice Bouck and Mr. Justice Holland dissent.

Mr. Justice Butler, concurring in part and dissenting in part.

So far as the decision concerns coupons made payable at the office of the county treasurer or at the banking house of Kountze Brothers in New York City, at the option of the holder, I concur therein. So far as it concerns coupons made payable only at the banking house of Kountze Brothers in New York City, I dissent. As to the former, until the coupon holders made their election to receive payment at Kountze Brothers ’ banking house, and the county treasurer received notice of such election, he should have kept the money in Colorado in readiness to make payment at his office. As to the latter, the case is different. Section 8366, Compiled Laws of 1921, provides that interest on school district bonds is “to be payable at such place or places as shall be. fixed by said board and designated in said bonds. ’ ’ Acting under the authority thus conferred upon it, the school board fixed the place of payment, and the only place of payment, of the interest; namely, the banking house of Kountze Brothers in New York City, and designated such place of payment in both the bonds and interest coupons. That amounted to. a warrant directing the county treasurer to pay the interest at the place designated, and it became the duty of the county treasurer to transmit to Kountze Brothers in New York City school district funds to pay the interest coupons when due. Surely, he should not be penalized, for the benefit of the school district, for following the direction of the school board, which, in designating Kountze Brothers’ bank as the place of payment, acted under express statutory authority.

Mr. Justice Bouck and Mr. Justice Holland concur in this opinion so far as it deals with coupons made payable at the banking house of Kountze Brothers only.