Manley v. City of Atchison

1. City Treasurer; Contract; XJsc of City Funds for Private Purposes.. A contract made between the mayor and council on one side, and the city treasurer on the other, that the treasurer may use the funds of the city and pay a percentage therefor, is illegal and void, and does not authorize the treasurer to so use the funds. Nor does the fact that such contract was made at the time of the appointment of the treasurer, and kept from the knowledge of those persons who became the sureties on the bond of the treasurer, lessen the liability of such sureties. 2. Treasurer’s Books; Evidence. Where a record is kept in a book, of the funds received and paid out by a city treasurer, and the different funds are kept separate, such book is the best evidence of what funds are in the hands of the treasurer; and in the absence of proof Of loss of such hook, or that it was falsely kept, or some other sufficient legal cause for its non-production, the .city will not be allowed to prove by verbal testimony the amount of any jiarticular fund in the hands of the treasurer.

Error from Atchison District Court. ■ The City of Atchison, as plaintiff, brought an action against Frank Smith, Louis Manley, Samuel C. King, John A. Martin,. John M. Price, and P. H. Wilbor. Smith and Wilbor were not served, and did not appear. The petition alleged that Smith was treasurer of the city of Atchison from April 30th 1868 to February 1869, when he resigned; that he refused to settle his accounts as svich treasurer, and pay over to his successor the moneys in his hands, etc. The other defendants were sureties in the official bond of Smith, and judgment ■was demanded for the recovery of the several funds withheld by Smith, (designating the respective funds, and the amount of each,) amounting in the aggregate to $6,122.15. The official bond, sued upon, contained the condition, that “if the said Smith shall well and truly and faithfully discharge the duties of said office, and shall account for and pay all moneys or property coming into his hands by virtue of said office, according to law, and the charter and ordinances of the city of Atchison, then this obligation to be null and void, otherwise to remain in full force and virtue.” The sureties served answered—first, a general denial; second, that Smith was not legally school treasurer, and their suretyship extended only to the city funds proper, and not to the school funds;. third, that Smith’s appointment was upon an unlawful agreement between Smith and the mayor and council that Smith might use the public moneys coming into his hands in his private business, and that he did so use the said moneys with the knowledge and consent of the mayor and council, and without the knowledge or consent of his sureties. The action was tried at the November Term 1871. Certain evidence offered by plaintiff vras excluded, and certain other evidence offered by defendants was also excluded. Both parties excepted, and each settled a bill of exceptions. The jury returned a verdict in favor of the city for $2,784.66. Each party moved for a new trial, which was refused; and judgment being given on the verdict, each party brings the case here on error for review. Both appeals were heard together, and decided together. The defendants below are designated as “plaintiffs in error,” and vice versa. 1. The evidence offered to show the liability of plaintiffs in error for the school funds was properly rejected. The bond sued on was a contract with the city; and Smith and his sureties were accountable under the bond only for money or property coining into his hands “according to law and the charter and ordinances of the city of Atchison.” The city had no control over the school funds, and no authority to take a bond, or perform any other act in relation to them, except to levy and collect the tax reported by the board of education. Ch. 19, §78, Gen. Stat. The board of education had the exclusive charge of the school funds, under an entirely distinct and separate organization for purposes specified and defined by law. See said ch. 19, art. 5, passim. The board of education had a treasurer of its fuuds, whose duties were prescribed by law, (ch. 19, § 63;) and the fact that this treasurer was the same person who held the office of city treasurer, did not change his obligations or responsibilities to the board of education in relation to the funds belonging to them, and placed in his charge. The ordinance defining the duties of the treasurer shows that the city did not contemplate any liability on 'the part of the treasurer for the school moneys. It ivas the duty of the board of education to demand a bond from the treasurer for the faithful performance of his duties as treasurer to the board: § 63, supra. The bond must be construed strictly in favor of the sureties. The law as it existed at the time entered into and formed a part of their contract, and they contracted witli reference to it. 5 Kas., 22; 16 Ohio St., 17; 6 Jones (Law,) N. G, 62. 2. It was error to reject the testimony offered by plaintiffs in error to prove the contract'between Smith and the mayor and council, and that Smith was appointed city treasurer pursuant to such contract. Said contract and appointment were in direct violation of the law, and the ordinances of the city. The sureties contracted in reference to the law as it existed at that time. It entered into their contract and they had a right to rely upon it: 5 Kas., 22. One who becomes surety for another is presumed to do so in the belief that the transaction between the principal parties is one occurring in, the usual course of business of that description, subjecting him ■only to the ordinary risks attending it. To receive a surety acting upon this belief, the party receiving him knowing there •are other circumstances, having suitable opportunity to make them known, but withholding them, is a legal fraud, by which the surety will bo relieved from his contract: 36 Maine, 179. Facts known to the other party, and not known to the ■surety, of a character to materially increase the risk beyond that assumed in the ordinary course of business, and not communicated, entirely discharge the surety, (36 Maine, 562,) though it may still be binding on the principal: 9 Ala., 42. Misrepresentation or concealment of any material fact avoids ■contract of suretyship: 39 Maine, 532. The contract between the city and Smith, the treasurer, was not in the usual course of business of that description. The irse of the funds of the city by the treasurer in his own private affairs upon an interest of seven per cent., increased the risk ordinary to such a transaction. The agreement that the treasurer should receive for his services no compensation other than the use of the money, shows that the intention was to violate the law. The arrangement was secretly made in executive session, and was known to the mayor and council -of the city. It was not communicated to the sureties upon the bond. They knew nothing about it, and under the law ■and the authorities they should be discharged. 1. It was not competent for plaintiffs in error to prove that 'Smith was appointed city treasurer upon an agreement that he should allow the city-interest oh all current funds in his hands, and receive no compensation for his services, and that ■.such contract was unknown to them when they executed the bond as. Smith’s sureties. Such proof, if made, would not ■affect the question of their legal liability, and it was no error to reject it. The city can only act through the mayor and council in ■appointing a treasurer- (Gen. Stat., 159, 160, §28.) The mayor and council had no authority to make such a contract as is implied in the questions asked. The law did not authorize it, and the ordinance of the city expressly forbade it. And if the mayor and council had undertaken to make-such a contract, it would have been void, and the city would not have been bound thereby. Yet, if such agreement had even been inserted in the bond, though that part of the bond would be void, yet it would not invalidate the other conditions of the bond. 12 Wheat., 136; 5 Pet., 373; 10 Pet-., 360;. 8 Smedes & Mar., 151. But the plaintiffs in error are estopped by their deed' from setting up any such defense as is indicated by said questions. It is recited in the bond that “Frank Smith was duly appointed as treasurer of the city of Atchison,, * * * in accordance with law, and the ordinances of the-city of Atchison, and is about to enter upon the discharge of the duties of said office for the ensuing term.” 10 Peters,. 365; 2 Smith’s Lead. Cas., 609. Again, whatever negotiations were made before the execittion of the bond, were concluded by and merged in it. 12 East, 6; 6 Ohio St., 1; 7 Cush., 268-The obligation of the bond depends upon its words, and not upon extraneous circumstances. 11 Wheat., 186; 3 How., 587;. 17 Ohio, 565; 6 Ohio State, 607., The mayor and council had no authority to bind the city by such an agreement. The-city could not therefore consent to the use of the public funds by the treasure]1. The ordinance forbade it. 2 Kas., 357r 371. 2. Smith’s official bond was given April 30th 1868, and the liability accrued prior to Feb. 9th, 1869. The one question is: As the law then stood, were the school funds “ city taxes”? Or, did the city treasurer, by virtue of his office, receive those moneys? Ch. 19,-Gen. Stat. 1868, provides for the 'organization of cities of the second class. In the city council alone is vested the authority to divide the city into school districts, (§ 14,) and to levy all school taxes; (§ 67.) The title to school property vests in the city, (§ 70,) and is sold only by the city, (§ 71.) The.moneys arising from such sales are invested only by the city, (§ 78,) and its repayment is secured by á lien on the school property of the city, (§ 81.) All school fund taxes are paid only to city treasurer, §§ 68,. 78. All these things are acts of city officers, as city officers; and these funds must be city funds devoted to a specific purpose. Jackson Co. v. Craft, 6 Kas., 145, seems to settle this case for defendant in error. The board of education was not a body of any authority— only an advisory body, like an overseer of poor; unlike a school district board, which might levy a tax, (§ 70, ch. 107, Gen. Stat., 1043,) own property, convey, sue and be sued, etc. That the board of education were powerless to act, but only as an advisory board, see §§ 67 to 71, 78, of said ch. 19 of Gen. Stat. Smith held but one office, that of “city treasurer,” and his bond was given for the faithful performance of its duties, and this included the collection and proper custody of the school funds: §§ 61, 68, ch. 19, supra. But it is said that by § 63 another office is created, and another bond to perform its duties required. Not so. Only certain specific duties are required from the city treasurer for Avhich further security “may be required to perform his duties as treasurer to said board.” What duties ? Not to collect taxes for the benefit of schools—these were placed in his hands as city treasurer by § 68. Not to collect interest—it was to be “paid into the city treasury,” by §78. But as “treasurer to the board” he had to attend meetings, submit reports, etc., not required of him as city treasurer. The law holds public officers on grounds of public policy to a strict accountability, and equally so their sureties: 6 Ohio-St., 607; 3 How., 578; 11 How., 154; 15 Peters, 187. The city treasurer was sued on his bond as city treasurer for money not accounted for, that came into his hands by virtue-of his office as such treasurer. Can he avoid payment ? If not, neither can his sureties.