Commonwealth v. Baily

1. Under the statutes (cited in the opinion of the court below), an affidavit of defence is required to be filed in all actions brought by the commonwealth for the recovery of money, the requirement extending to an action upon the official bond of the state treasurer. 2. The condition of a state treasurer’s bond, that he “shall truly and faithfully perform all the trusts and duties enjoined and required by law to be done and performed” by him, is broken if he’fail to account for and pay over to his successor in office all moneys received by him in his official capacity. 8. It is not a defence to an action for the breach of such condition, that money sought to be recovered in the action was lost to the state treasurer, by the failure in business of a bank in which he had deposited the money, without fault or negligence on his part and without knowledge of the bank’s condition. 4. Nor is such a defence permissible by reason of the provisions of § 8, act of May 9, 1874, P. L. 126, and § 2, act of February 12, 1876, P. L. 3, requiring monthly statements of the amounts of public funds deposited in banks, etc., with the securities held by the state for the same.

APPEAL BY DEFENDANTS FROM THE COURT OF COMMON PLEAS OF DAUPHIN COUNTY. No. 30 May Term 1887, Sup. Ct.; court below, No. 65 January Term 1887, C. P. To tbe number and term of the court below, an action of debt was brought by the commonwealth against Silas M. Baily, Charles H. Rush and others, to recover upon the bond of the said Silas M. Baily, as state treasurer. The bond sued upon was dated April 13, 1882, duly approved and filed, and was for the sum of $500,000, “ to be paid to the said commonwealth, for the uses, intents and purposes declared and appointed by law; ” tbe condition being “ that if the above bounden Silas M. Baily, state treasurer of the commonwealth of Pennsylvania, shall truly and faithfully perform all the trusts and duties enjoined and required by law to be done and performed by such state treasurer, then this obligation to be void,” etc. The declaration charged as the breach of said condition the failure of the defendant to account for and to pay over to his successor in office a balance of $70,001.80, due from him to the commonwealth. With the declaration was filed a copy of the account of the Exchange Bank of Bradford, as shown by the books of the state treasurer’s office, the account showing said balance due the commonwealth. On January 26,1887, General Baily, on behalf of himself and his co-defendants, filed an affidavit of defence, averring: He was elected state treasurer of the commonwealth of Pennsylvania at the general election held in November, 1881, and commissioned as such on the 24th day of April, 1882. As required .by the law, he gave a bond to the commonwealth of Pennsylvania, with sureties, a copy of which is hereto attached, and it was approved by the governor of the commonwealth on 24th April, 1882. One of the duties of the office of state treasurer, into which he entered on the first Monday of May, 1882, required him to collect and receive very large sums of money for the commonwealth of Pennsylvania, and this money he was unable to keep and retain in his office by reason of the failure of the commonwealth of Pennsylvania to furnish him with a vault or other sufficient method for its safe keeping and protection. He was advised, believed and still believes that the commonwealth of Pennsylvania had not only not selected, appointed or designated any place, corporation, partnership, firm or individual, as the depository of the public money, but that it intended by the passage of the acts of the general assembly of May 9, 1874, P. L. 126, and of February 12, 1876, P. L. 8, that such public money should be deposited with such banks, corporations, firms and individuals as the state treasurer, in the exercise of his discretion, should select for that purpose. He was further advised, believes and expects to be able to prove that such was the belief of his predecessors in office, and that acting upon such belief they selected such banks, corporations and individuals as they deemed to be proper depositories of the public funds, and such official reports and publications of the names of the depositories of the public money were made as the statutes of this state required. He accepted the interpretation which his predecessors had, with public sanction, placed upon the said laws of this commonwealth, and in like manner selected certain banks, corporations, firms and individuals, with which and whom he deposited the public funds, and among the banks thus selected was one known as the Exchange Bank of Bradford. This bank was one of excellent character and unquestioned credit in the section of the state in which it was located. It had gained and retained the confidence of the people and was trusted by very many citizens of this state with the care and control of their money, and your affiant, after careful inquiry made believed the public trust so placed in this bank to be warranted by the character of its business, the methods of its management, the value of its property and the extent of its resources. In this belief your affiant deposited with the bank various sums of money in the name of the commonwealth of Pennsylvania. The deposits so made in the name of the commonwealth of Pennsylvania were not time deposits, but were made upon demand, and without reward, gain or profit, or the hope or promise of it, from the said bank, or from any one interested in or representing it, and in the same manner in which deposits are ordinarily made by other citizens of this state in such banks as they select for their depositories, and in the identical manner in which they were made by many citizens of this state in this particular bank. This bank failed in 1884, and by reason of its failure and for no other cause whatever, your affiant was unable to obtain from it the sum of seventy thousand and one dollars and eighty one-hundredths ($70,001.80) of the public money which had been deposited with it in the name of the commonwealth of Pennsylvania. Your affiant was guilty of no negligence in placing a portion of the public funds in the custody of said bank, and he has done nothing in violation of the condition of his bond, or which subjects him or his sureties to any liability to the commonwealth of Pennsylvania, as he made most careful inquiry into the character, condition and standing of the bank, and received convincing assurances of its strength and responsibility before he made any deposits in it, and in addition thereto he took from said bank, for the use of the commonwealth, as security for said deposits, two bonds secured by solvent securities, for the sums of seventy thousand dollars ($70,000) and fifteen thousand dollars ($15,000) respectively. Your affiant further says that while he has done or omitted nothing by which he or his sureties became in any manner liable to the commonwealth of Pennsylvania for any sum whatever, yet he has caused suit to be brought upon the bonds so given by said bank in order to recover the amounts for which they were given, and that said suits have not yet been finally determined and decided. When so determined and decided in his favor, it is his intention to pay into the treasury of the. commonwealth of Pennsylvania whatever sums of money he may receive therefrom. All these statements your affiant believes and expects to be able to prove on the trial of the cause. A rule to show cause why judgment should not be entered for want of a sufficient affidavit of defence having been argued, on May 9, 1887, the court, Simonton, P. J., filed the following opinion: This is an action brought by the commonwealth of Pennsylvania against Silas M. Baily, late state treasurer, and his sureties, on his official bond. At the end of his term of office he was in default in a sum exceeding $70,000, and this action is brought to recover this sum. In answer to the action, an affidavit of defence is filed by Mr. Baily, on behalf of himself and sureties, which in substance sets forth that he and they are not liable, because the commonwealth had provided no vault for a safe keeping of the public funds, and because it is tobe inferred from the act of 1874, P. L. 126, and of 1876, P. L. 3, that the treasurer is not liable for the loss of moneys deposited in the manner referred to in said acts. The affidavit further sets forth, that the practice of the state treasurer, for the time being, has been to make such deposits ; that the bank in which the deposits were made, in this instance, was in good credit, and that defendant made careful inquiry, as to its standing and management before the deposits were made; that the deposits were made in the name of the ■commonwealth, and were payable on demand, by the bank; that no reward, gain or profit accrued, or was to accrue to the treasurer; that the bank failed in 1884, and, by reason of its failure, and for no other cause whatever, the defendant was unable to account for and pay the said money to his successor; that he took from said bank bonds in the name of the commonwealth, with solvent sureties in an amount greater than said deposits; that he has brought suit against said bank and the sureties on the said bonds, which have not yet been determined. It was contended, on behalf of the defendants, that this is not an action in which an affidavit of defence can be required, by law, from the defendant. A comparison of the provisions of the act of April 16,1845, § 12, P. L. 535; act of 1846, § 4, P. L. 413; act of April 21,1857, § 3, P. L. 266, and act of April 7,1862, § 1, P. L. 304, shows clearly that an affidavit of defence is required to be filed in all actions brought by the commonwealth for the recovery of money, and a reference to these acts is all that is necessary on this point. The only real question in the case is whether the treasurer and his sureties are liable upon his official bond for moneys deposited by him, as stated in the affidavit, and lost without fault or negligence on his part. There is much conflict of decision on this question; many courts holding that public officers sustain the relation, merely, of bailees, with respect to public moneys in their hands, and are therefore not liable to account therefor, when it has been lost without negligence or fault on their part. This however, is not the law in this state. In Commonwealth v. Comly, 3 Pa. 372, which was an action of debt on the bond of a collector of tolls, the defence was that the moneys had been stolen from the desk of the collector in the night time, and this was held by the court to be no defence to the action on tbe bond. Gibson, C. J., delivering the opinion of the court, said: “ The responsibility of a public receiver is determined not by the law of bailment, which is called in to supply the place of a special agreement where there is none, but by the condition of his bond. The condition of it in this instance was, to account for and pay over the moneys to be received ; and we would look in vain for a power to relieve him from the performance of it.” The condition of the bond in this case is “ that if the above bounden Silas M. Baily, state treasurer of the said commonwealth of Pennsylvania, shall truly and faithfully perform all the trusts and duties enjoined and required by law to be done and performed by such state treasurer, then this obligation to be void or else to be and remain in full force and virtue.” It cannot be doubted that one of the trusts and duties required by law — whether by statute or at common law — of the state treasurer, is to account for and pay over to his successor all moneys received by him in his official capacity. His failure to do so was therefore a breach of the condition of the bond. As was said by Mr. Justice Strong, in Boyden v. U. S., 18 Wall. 20: “ It is a settled rule that if the performance of an express engagement becomes impossible by reason of anything occurring after the contract was made, though unforeseen by the contracting party, and not within his control, he will not be excused.” And for reasons of public policy, as is further said in the same case: “ The rule has been applied rigidly to bonds of public Qfficers intrusted with the care of public money. Such bonds have almost invariably been construed as binding the obligors to pay the money in their hands when required by law, even though the money may have been lost without fault on their part.” ' In the case from which these quotations are made, the receiver was held liable although his failure to pay over the moneys was caused by the fact that he was “ suddenly beset in his office, thrown down, bound, gagged, and that against all the defence he could make the money was violently and without his fault taken from him.” This case followed and affirmed United States v. Prescott, '3 How. 578, which is also quoted and approved by Gibson, C. J., in Commonwealth v. Comly, above referred to, where it was held to be no defence, even on behalf of the surety, that the money was stolen from the principal without any fault or negligence on his part, and we have not been referred to, nor can we find, any later case in this state modifying this doctrine. The question is therefore not an open one for a court of the first instance, in this state, even were it not supported by a mass of authorities elsewhere, a few of which are here referred to: United States v. Morgan, 11 How. 154; United States v. Dashiel, 4 Wall. 182; United States v. Keehler, 9 Wall. 83; Bevans v. United States, 18 Wall. 56; United States v. Thomas, 15 Wall. 337; State v. Harper, 6 Ohio St. 607 (67 Am. Dec. 363) ; New Providence v. McEachron, 4 Vroom 339; Taylor v. Morton, 37 la. 550; Union Tp. v. Smith, 39 la. 9 (18 Am. Rep. 39) ; Halbert v. State, 22 Ind. 125; Morbec v. State, 28 Ind. 86; Rock v. Stinger, 36 Ind. 346; Steinbach v. State, 38 Ind. 483; Perley v. Muskegon, 32 Mich. 132 (20 Am. Rep. 637). It is contended, however, on behalf of defendants, that the provisions of the acts of 1874 and 1876, referred to in the affidavit of defence, imply that where the money is deposited by the treasurer in banks in good standing, and security is taken in the name of the commonwealth therefor, the liability of the treasurer to account absolutely for the sums so deposited ceases. We do not think these acts were intended, or can properly be construed, to have this effect. They were intended simply to add to the security of the state by furnishing to the auditor general such information as would enable him, if necessary, to act as a check upon carelessness or neglect of the treasurer. As the law has been declared, there remains for us no other course than to direct judgment to be entered in favor of the commonwealth against the treasurer and his sureties for the penalty of' the bond, with leave to issue execution for the amount appearing to be due from the copy of the account filed with the declaration; said amount to be liquidated by the prothonotary. Judgment having been entered in favor of the commonwealth and against the defendants for $500,000, the penalty of the bond, and the sum for which execution might issue being liquidated at $86,183.88, as of the date of said decree, the defendants took this appeal, specifying that the court erred: 1. In directing judgment to be entered against the treasurer and his sureties for want of a sufficient affidavit of defence. 1. The bond given by the state treasurer is provided for by .§ 1, act of May 9, 1874, P. L. 126, as follows: “ He shall become bound to the commonwealth in an obligation, with ten or more sufficient sureties, to be approved by the governor, in the sum of five hundred thousand dollars, conditioned for the true and faithful performance of the trusts and duties of his office.” The condition of the bond in suit is not copied from this act, but from § 40, act of March 80, 1811, 5 Sm. L. 237, which was supplied by the act of 1874. The eighth section of the act of 1874 provides that the state treasurer, on the first business day of every month, shall render a statement of account to the auditor general. “ Such statements shall include the names of banks, corporations, firms or individuals with whom the public funds are deposited, with the various amounts of such deposits, the securities held by the state for the safe keeping of the same, and the rate of interest received by the state on such deposits,” etc. This statement shall be recorded and be open to the inspection of officers and citizens, and be “ published in two newspapers at Harrisburg for general information.” 2. Section 2, act of February 12, 1876, P. L. 3, is substantially the same as § 8 of the act of 1874, except that it relates to the sinking fund and contains the additional provision that each bank, corporation, firm or individual with whom such deposits are made shall render to the' auditor general, on the first business day of each month, arx account and statement corresponding withtha±-«f~the'«fca,'te treasurer. This eighth section of the act oj/1874, and § 2 of the act of 1876, are identical with § 10/act of April 13, 1870, P. L. 67, which applies to both th^fgeneral fund and the sinking fund, and contained the provision last referred to in the act of 1876, which was omitted fronffthe act of 1874. That it is the duty of the state treasurer jfco pay over to his successor the moneys remaining in the treas/ury, or on the books of the treasury, at the expiration of his term, subject to all the provisions of the law, is not denied; but ,what is maintained is, that as there is no express act of assembly requiring him to pay over all moneys received by him, and as such is not the condition of his bond, he is not subject to the rule laid down by the court below, which would make him responsible for the state’s money absolutely and under all circumstances. ' 3. In the case of Commonwealth v. Comly, 3 Pa. 372, mainly relied upon by the court below, and indeed in nearly every case referred to by the court, if not every one, the condition Ébf the bonds sued on was that the officer should “ account for and pay over all moneys he may receive,” etc. There was [in every case an absolute undertaking by principal and sureties, in terms, that the money should be paid over. In the case deferred to, Judge Gibson said that “ the responsibility of a public receiver is determined not by the law of bailment, which is called in to supply the place of a special agreement where there is none, but by the condition of his bond.” We have seen that the legal condition of General Baily’s bond was “ for the true and faithful performance of the trusts and duties of his office.” What were these trusts and duties? He was to take care of the money collected by him. How was he to take care of it ? How was he to perform this “ trust and duty ? ” 4. The acts of 1870, 1874 and 1876 recognized his right to deposit it with “ banks, corporations, firms, or individuals.” They allowed him to take securities “ to the state for the safe keeping of the same.” They allowed him to contract for payment to "the- state of interest on such deposits. And the statements he was required to make monthly were to be open to certain officers and air persons, and to be published in two Harrisburg newspapers. 'Ti¡$ depositories were also required to make monthly statements o£\the same facts to the auditor general. How can an officer who~hs&-duií^5Ótbrthe money in his charge just what the law says he may do withÁt; and who has done nothing forbidden by law, be held responsible for a loss which has resulted without any fault or negligence of bis own ? \ 5. By § 4, act of April 13, 1870, P. L. 68, the commissipners of the sinking fund are required to deposit in the Farmers & M. N. Bank of Philadelphia, the moneys in the state treasury due to the sinking fund. Would the state treasurer and his sureties continue liable for such moneys after such deposit had been made ? True, the depository here is designated by l.aw, while in the other case the state treasurer is allowed to select the depositories; but will he and his sureties be held to guarantee the deposits so made, the state treasurer exercising proper care and acting in good faith, under a bond requiring only the “ true and faithful performance of the trusts and duties of his office?” 1. If it be true that when the state treasurer receives the money of the state into his possession he becomes a debtor of the state, it must be true that he remains such debtor until he is discharged from his liability by payment, according to law, of the money received by him, and that any sum remaining to his debit after payment of warrants drawn by lawful authority, is payable to his successor in office or to any person lawfully demanding it at the instance of the state. The condition of the bond, therefore, which requires that he shall truly and faithfully perform all the trusts and duties enjoined and required by law to be done and performed, clearly covers the duty in question, which is clear at common law, and which needs no declaratory statute for its definition. 2. The responsibility of a public receiver depends on his contract, and not on the law of bailment; and where that contract was to pay over the money received, it is no defence for him and his sureties, that the money was stolen even,- although the jury find that it was kept as a prudent man would keep his own funds: Commonwealth v. Comly, 3 Pa. 372; United States v. Prescott, 3 How. 578; Boyden v. United States, 13 Wall. 17; Plancock v. Hazzard, 12 Cush. 112; Thompson v. Board of Trustees, 30 Ill. 99; New Providence v. McEachron, 4 Vroom 339; Hennepin Co. v. Jones, 18 Minn. 199; Redwood Co. v. Tower, 28 Minn. 45 ; Havens v. Lathene, 75 N. C. 505 ; Lowry v. Polk Co., 51 Ia. 50 (33 Am. Rep. 114); State v. Moore, 74 Mo. 413 (41 Am. Rep. 322) ; Township v. Morton, 37 Ia. 550; State v. Clark, 73 N. C. 255; Inglis v. State, 61 Ind. 212; Hart v. Poor Guardians, 81* Pa. 466; Union Tp. v. Smith, 39 Ia. 9 (18 Am. Rep. 39); Perley v. Muskegon, 32 Mich. 132 (20 Am. Rep. 637) ; Swartout v. Mechanics Bank, 5 Den. 555; Commercial Bank v. Hughes, 17 Wend. 100; State v. Powell, 67 Mo. 935 (29 Am. Rep. 512) ; Ward v. School Dist., 10 Neb. 293 (35 Am. Rep. 477); Jefferson Co. v. Lineberger, 3 Mont. 231 (35 Am. Rep. 462) ; Wheeler v. Hambright, 9 S. & R. 390. 1. The condition of General Baily’s bond is that he shall truly and faithfully perform the trusts and duties of his office. Those trusts and duties are defined in the acts of 1870, 1874, and 1876, and the obligor# have by no covenant in the bond assumed a higher duty or responsibility than that imposed by those acts. Nowhere within the corners of those acts is it prescribed that the state treasurer shall absolutely and in all events be held responsible for all money received by him. Therefore, we contend that neither by express terms nor by implication have these appellants assumed that measure of absolute liability imposed on them by the court below. Had the bond of General Baily, or did the acts relating to the office of state treasurer prescribe that he shall truly and faithfully perform the duties of his office, and pay over all moneys received by him, then Prescott v. United States, 8 How. 578, and Commonwealth v. Comly, 3 Pa. 372, would be decisive of this case. This distinction is clearly drawn in United States v. Thomas, 15 Wall. 337. 2. Mr. Justice Bradley, delivering the opinion of the court in United States v. Thomas, treats the liability of the defendant in a double aspect: “ First, in regard to the obligation arising from official duty; and, secondly, in regard to that arising from the bond, because the condition of the latter is twofold, that the principal shall faithfully discharge his official duties, and that he shall pay the moneys of the government that may come into his hands, as and when it shall be demanded of him. It is contended that the latter branch of the condition has a more stringent effect than the former, and creates an obligation to pay, at all events, all public moneys received.” . . . . “ The general rule of official obligations, as imposed by law, is that the officer shall perform the duties of his office honestly, faithfully and to the best of his ability. This is the custom of all official oaths. In ordinary cases, to expect more than this would deter upright and responsible men from taking office. This is substantially the rule by which the common law measures the responsibility of those whose official duties require them to have the custody of property, public or private. If in any case a more stringent obligation is desirable, it must be prescribed by statute, or exacted by express stipulation. The ordinary rule will be found illustrated by a number of analogous cases.” 3. “ Where, however,” the Justice continues, “ a statute merely prescribes tbe duties of tbe officer, as that he shall safely keep money or property received or collected, and shall pay it out when called upon to do so by the proper authority, it cannot, without more, be regarded as enlarging, or in any way affecting the degree of his responsibility. The mere prescription of his duties has nothing to do with the question as to what shall constitute the rule of responsibility in the discharge of those duties, or a legal excuse for the non-performance of them, or a discharge from their obligation. The common law, which is common reason, prescribes that; and statutes, in subordination to their terms, are to be construed agreeably to the rules of the common law.” 4. We cite fully from the opinion above, because it is the last utterance of that court upon the subject, being decided in 1872, and especially because it was decided in view of and comments upon United States v. Prescott, 3 How. 578; Commonwealth v. Comly, 8 Pa. 372; United States v. Dashiel, 4 Wall. 182; United States v. Keehler, 9 Wall. 83; Bevans v. United States, 13 Wall. 56; State v. Harper, 6 Ohio St. 607; which are the cases relied upon by the court below and which, Justice Bead-let says, all concur in establishing the distinction we contend for, viz.: “ that a bond with an unqualified condition to account for and pay over public money, enlarges the implied obligation of the receiving officer, and deprives him of defences which are available to an ordinary bailee.”