Opinion
No. 5685.
May 26, 1931.
APPEAL from the District Court of the Eleventh Judicial District, for Twin Falls County. Hon. Win. A. Babcock, Judge.
Action by Common School District Number 61 in the County of Twin Falls against Twin Falls Bank Trust Company for conversion. Judgment for plaintiff. Affirmed.
Frank L. Stephan, for Appellant.
Respondent school district in the transaction in question herein is subject to the same rules as individuals in similar transactions. Orders for common school district warrants are assignable non-negotiable instruments in the drawing of which the trustees of such district are performing a business or contractual function. (C. S., sec. 824, amended by chapter 215 of the 1921 Sess. Laws, p. 429; Fenton v. Board of County Commrs., 20 Idaho 392, 119 P. 41; Barton v. Alexander, 27 Idaho 286, Ann. Cas. 1917D, 729, 148 P. 471; Strickfaden v. Greencreek Highway Dist., 42 Idaho 738, 248 P. 456, 49 A.L.R. 1057; 1 McQuillin, Municipal Corps., sec. 113; 5 McQuillin, Municipal Corps., sec. 2434; Argenti v. City of San Francisco, 16 Cal. 255; Slayton Co. v. Panola County, (D.C.) 283 Fed. 330; Boise City v. Wilkinson, 16 Idaho 150, 102 P. 148; City of Twin Falls v. Harlan, 27 Idaho 769, 151 P. 1191; Robinson v. Lemp, 29 Idaho 661, 161 P. 1024; State v. Twin Falls-Salmon River Land Water Co., 30 Idaho 41, 166 P. 220; Jefferson County v. McGrath, 205 Ky. 484, 266 S.W. 29, 41 A.L.R. 586.)
By acceptance, approval, redemption and payment of the forged order in question by and through the county auditor and the county treasurer (treasurer of respondent) respondent adopted said order as its genuine and valid obligation and ratified and consented to the cashing of the warrant issued thereon by appellant and may not now recover the payment. ( United States v. Bank of New York, etc., 219 Fed. 648; Bank of United States v. Bank of Georgia, 10 Wheat. (U.S.) 333, 6 L. ed. 334; United States v. Chase Nat. Bank, 252 U.S. 485, 40 Sup. Ct. 361, 64 L.ed. 675; United States v. National Exchange Bank of Baltimore, 270 U.S. 527, 40 Sup. Ct. 388, 70 L. ed. 717; Cooke v. United States, 91 U.S. 389, 23 L. ed. 237; American Hominy Co. v. Milliken Nat. Bank, 273 Fed. 550; note, 10 L.R.A., N.S., 68 and 70.)
Even though negligence on the part of a cashing bank is established, so as to enable the drawer to recover, conduct of the drawer may again intervene to bar recovery. Negligence or long delay in discovering the forgery, or lack of promptness in notifying the cashing bank after discovery of the forgery, or if the forgery should, in the exercise of reasonable diligence have been discovered, will bar recovery, particularly if the position of the cashing bank has in the meantime been changed to its damage. (12 A.L.R. 1105, 1107, 1113; State v. Abramson, 57 Ark. 142, 20 S.W. 1084; United States v. Central Nat. Bank of Philadelphia, 6 Fed. 134; United States v. Clinton Nat. Bank, 28 Fed. 357; note, 12 A.L.R. 1105, 1107, 1108, 1109; Neal v. Coburn, 92 Me. 139, 69 Am. St. 495, 42 Atl. 348, as is cited at page 1109 of 12 A.L.R.; 7 C. J. 691, note 8-A.)
Where a party has been prevented by conduct of another from taking prompt action for the collection of a debt, that constitutes such a change of position for the worse as to meet the requirements of the law creating estoppel, and the change of position rule. A right to pursue timely remedy against a forger is a valuable right, which if jeopardized in any manner by negligence or delay on the part of a plaintiff, constitutes a change of position, sufficient to act as a bar to such plaintiff's recovery. (C. S., secs. 6064 and 6415; Leather Manufacturing' Nat. Bank v. Morgan, 117 U.S. 96, 6 Sup. Ct. 657, 29 L. ed. 811; Bank of United States v. Bank of Georgia, supra; Smith v. Mercer, 6 Taunt. 76, 128 Eng. Rep. 961, cited in 12 A.L.R. 1107; Johnson v. Commercial Bank, 27 W. Va. 343, 55 Am. Rep. 315; Weinstein v. Nat. Bank, 69 Tex. 38, 5 Am. St. 23, 6 S.W. 171.)
Sweeley Sweeley, for Respondent.
In exercising its powers and performing its duties, including the issuance of orders, a school district acts only in a governmental capacity and is not estopped by any mistakes or acts of negligence or misconduct of any of its officers or agents or other public officers over whom it has no control, from maintaining an action to recover back money wrongfully taken. (24 R. C. L., pp. 564, 565, sec. 7; Antin v. Union High School, 130 Or. 461, 280 P. 664, 66 A.L.R. 1271; Spencer v. School Dist. No. 1, 121 Or. 511, 254 P. 357; Bank v. Brainerd, School Dist., 49 Minn. 106, 51 N.W. 814; Freel v. School City of Crawfordsville, 142 Ind. 27, 41 N.E. 312, 37 L.R.A. 301; School District No. 48 of Maricopa County v. Rivera, 30 Ariz. 1, 243 P. 609, 45 A.L.R. 762; Howard v. Tacoma, 88 Wn. 167, Ann. Cas. 1917D, 792, 152 P. 1004; Wiest v. School Dist. No. 24, 68 Or. 474, 137 P. 749, 49 L.R.A., N.S., 1026; 19 R. C. L. 1124, sec. 402; Consolidated School Dist. v. Wright, 128 Okl. 193, 261 Pac. 953, 56 A.L.R. 152; 6 McQuillin, Mun. Corp., sec. 2675; School District No. 45 v. Correll, 220 Mo. App. 322, 286 S.W. 136.)
On or about the fourteenth day of September, 1928, there was presented to appellant bank a forged order purporting to have been drawn by the respondent school district, in the sum of $250, bearing the purported signatures of the chairman and clerk of said school district and the counter signature of the county superintendent of public instruction. Upon the back of said order appeared two indorsements: that of "Bessie Lakey," the payee, a fictitious person, and that of "C. Pond, V.L." The "C. Pond" representing Charlotte Pond, the then county superintendent, and the "V.L.," the initials of one Viola Lowe, who was her assistant at that time. The appellant bank purchased the said forged order and on the twentieth day of September, 1928, presented it, with its indorsement on the back thereof, to the county auditor, who, upon said date, issued a warrant payable to said bank. That thereafter said warrant was paid by the county treasurer, as treasurer of the district, out of the funds of said respondent district. This appeal is from a judgment in favor of the respondent school district for the amount of money so taken.
The complaint, demurrers and motions in this action are similar to those in the case of Common School District No. 27 in the County of Twin Falls, State of Idaho, v. Twin Falls National Bank, a Corporation, filed May 19th, raising identically the same questions and in that connection this case is governed by the decision of this court in the abovementioned case.
The decisive question in this case is whether or not the respondent is estopped and barred from recovery herein by the acts of the various county officials in the acceptance, approval, redemption and payment of the forged order in question, or by its own negligence is guilty of laches in the discovery of the forgery and in giving notice to the appellant bank of the same.
The courts have universally held that a school district is an agency of the state, created by law solely for the operation of a school system for the public benefit and derives all of its powers from statute, being limited to such as are deemed necessary for that purpose. By mandatory statutes it is prescribed in just what manner its funds can be paid out (Secs. 35, 46 (subd. 26), 55 and 69, chap. 215, 1921 Sess. Laws; secs. 905 to 911, inclusive, and secs. 913 to 915, inclusive, C. S. 1919; Common School District No. 27 in the County of Twin Falls State of Idaho, v. Twin Falls National Bank, a Corporation, supra), and the officers of the district and county, designated by law to perform such acts, exercise a public function for which the district receives no private or corporate benefit, and in the performance of such duties they act for the district only in a public and governmental capacity. The rule of law is well established that any acts of negligence, misconduct, mistake or omissions on the part of such officers in the performance of their functions and duties in that respect cannot estop the school district from maintaining an action to recover back money wrongfully taken, and the doctrine is also well settled that no laches can be imputed to a municipal corporation acting, as it is in this case, in a public and governmental capacity. (10 R. C. L. 706, 707, 708, secs. 34 and 35; 19 R. C. L. 1107, 1108; 24 R. C. L. 564, 565, sec. 7; Antin v. Union High School District, 130 Or. 461, 280 P. 664; 66 A.L.R. 1271; Board of Commrs. v. Nelson, 51 Minn. 79, 38 Am. St. 492, 52 N.W. 991, 993; Deer Creek Highway Dist. v. Doumecq Highway Dist., 37 Idaho 601, 218 P. 371; Strickfaden v. Greencreek Highway Dist., 42 Idaho 738, 248 P. 456, 49 A.L.R. 1057; Beach on Public Corporations, p. 268, sec. 263; 6 McQuillin, Municipal Corporations, 2d ed., p. 889, sec. 2847; Scibilia v. City of Philadelphia, 279 Pa. 549, 124 Atl. 273, 32 A.L.R. 981; Miller v. Clarke, 47 R.I. 13, 129 Atl. 606, 42 A.L.R. 1204; People v. Detroit etc. Co., 228 Mich. 596, 200 N.W. 536; Hanson v. Berry City of Fargo, 54 N.D. 487, 209 N.W. 1002, 47 A.L.R. 816; State ex rel. Rayl v. Twin Falls-Salmon River Land Water Co., 30 Idaho 41, 166 P. 220; Philadelphia Mortgage Tr. Co. v. City of Omaha, 63 Neb. 280, 93 Am. St. 442, 88 N.W. 523, 525; People v. Brown, 67 Ill. 435; State v. Paul, 113 Kan. 412, 214 P. 425; School Dist. No. 48 v. Rivera, 30 Ariz. 1, 243 P. 609, 45 A.L.R. 762; Freel v. School City of Crawfordsville, 142 Ind. 27, 41 N.E. 312, 37 L.R.A. 301; Wiest v. School Dist. No. 24, 68 Or. 474, 137 Pac. 749, 49 L.R.A., N.S., 1026; Harris v. City of Des Moines, 202 Iowa, 53, 209 N.W. 454, 46 A.L.R. 1429; Consolidated School Dist. v. Wright, 128 Okl. 193, 261 Pac. 953, 56 A.L.R. 152; Howard v. Tacoma School Dist., 88 Wn. 167, Ann. Cas. 1917D, 792, 152 P. 1004.)
Judgment affirmed. Costs to respondent.
Budge, Givens, Varian and McNaughton, JJ., concur.
ON REHEARING. (Filed October 19, 1931.)
Upon a rehearing of this case at Pocatello at the September, 1931, term, the appellant urged that county officials in countersigning the forged order in question and in the issuance and payment of the warrant thereon were not acting in a governmental capacity.
Justice Budge, quoting from Cyc., in the case of Boise Development Co., Ltd., v. Boise City, 30 Idaho 675, 167 Pac. 1032, defined governmental functions as follows: "Legal duties imposed by the state upon its creature, which it may not omit with impunity but must perform at its peril . . . . They are all imposed by statute, and are necessarily mandatory and peremptory functions . . . ." (28 Cyc. 267), which was again reiterated by him in the case of Youmans v. Thornton, 31 Idaho 10, 168 P. 1141.
This court in the case of Common School District No. 27 v. Twin Falls Nat. Bank, ante, p. 668, 299 P. 662, in discussing the acts of the county officials leading up to the payment of moneys from the funds of a school district stated that "an order by the district, countersigned by the county school superintendent, directed to the county auditor, is an absolute prerequisite to the issuance by the county auditor of a warrant on the county treasurer, to be charged against the funds of the district . . . . The statute specifying the procedural method must be followed, and the warrant issued to the payee in the order" (citing authorities), thus holding that the acts of such county officials in the acceptance, approval, redemption and payment of the forged order in question were mandatory and peremptory functions and clearly within the above definition of governmental functions.
The appellant also urged that the facts in this case fall within the exception recognized in the case of Wilkinson v. Boise City, 16 Idaho 150, 102 P. 148, to the general rule that the doctrine of equitable estoppel does not apply to a subdivision of the state exercising governmental functions. This court in that case, while recognizing this general rule, however, holds that there are exceptional cases in which the doctrine of laches and estoppel should be applied, such as in that case where the municipality has "recognized so-called private rights for a great number of years, and have stood by while valuable improvements were being erected, and it would work a fraud and irreparable wrong and injury upon the private individual to allow the city to invoke a stale legal right." The case at bar does not disclose facts which fall within any such exception, but on the contrary, presents facts showing that moneys of the school district have been unlawfully paid to and received by appellant bank by reason of a forged order.
This court has concluded that the payment of the forged order in question was not even a voluntary payment by respondent school district as is contended by appellant. However, giving it that favorable construction, it is a well-established rule of law that voluntary payments illegally made by a school district can be recovered and this court has gone so far as to hold that even though a school district has received a benefit from the transaction, which is not true in this case, no equitable considerations stand in the way of recovering back such moneys voluntarily but illegally paid. ( Independent School Dist. v. Collins, 15 Idaho 535, 128 Am. St. 76, 98 P. 857; Independent School Dist. v. Mittry, 39 Idaho 282, 226 Pac. 1076.)
As shown by the decision of this court in the case of Common School District v. Twin Falls National Bank, supra, moneys of a school district can only be paid out upon a valid order and the county officials had no authority or power to pay out moneys of respondent school district upon a forged order. Their act in so doing is prohibited by statute and is void. A void act is no act and a void payment is no payment. Such payment is not voluntarily made by the district but is made by the county officials in excess of their authority and in defiance to respondent school district's rights. ( Village of Ft. Edward v. Fish, 156 N.Y. 363, 50 N.E. 973, at p. 975; Adams County v. Ritzville State Bank, 154 Wn. 140, 281 P. 332.) This being true, there also could be no adoption and ratification of the forged order in question by any acts of the county officials.
Judgment affirmed.
Budge, Givens, Varian and McNaughton, JJ., concur.