19 N.W.2d 156 | Neb. | 1945
The city of Lincoln sought a declaratory judgment in the district court for Lancaster county to determine whether it was legal to continue the deposit of its funds in the defendant First National Bank of Lincoln, Nebraska, while a member of the city council was a stockholder, director or officer of the bank. The question arose by reason of identical provisions contained in section 3, art. VII, home rule charter, City of Lincoln, 1917, and section 15-603, R. S. 1943, applicable to cities of that class. The charter and the statute each provide in part: “No officer of the city shall be interested directly or indirectly in any contract to which the city, or anyone for its benefit, is a party; and such interest in any contract shall avoid the obligation thereof on the part of the city. * * * Nor shall any officer receive any pay or perquisite from the city other than his salary * * * .”
The district court by its decree found that the deposits of city funds in defendant bank were not prohibited by either of such provisions, notwithstanding that a member of the council was a stockholder, director and officer of the bank. Motion for new trial was overruled and the city appealed, contending that the decree is not sustained by the evidence and is contrary to law. We sustain these contentions.
The matters presented for decision involve only questions of law. There is no dispute concerning the facts. On Au
By arrangement with the city treasurer since 1938, division as to time and amount of deposits has been upon a basis of 15 months in proportion to capital and surplus, four months of which were allotted to the Continental National Bank, four to the National Bank of Commerce and seven to defendant bank. At the time of trial defendant bank was being used for a depository and would continue to be so used for approximately seven months. Deposits are made daily, recorded in a reg'ular bank book and withdrawn by check. Suburban banks have water and light department moneys on deposit but do not have active checking accounts.
Stanley Maly, a stockholder, director and vice-president of defendant bank, was elected and qualified as a member of the city council on May 12, 1941, for a four year term.. Subsequently the city treasurer has deposited city funds in defendant bank and it has accepted them claiming it was legally entitled to do so. At the time of the trial there was on. deposit with defendant approximately $1,250,000 of city funds and deposits will continue to be made in the future if legal to do so. To secure the city funds defendant has placed in escrow with the Federal Reserve Bank of Kansas City, Missouri, $1,000,000 in United States Treasury bonds at 2% per cent, due December 15, 1965.
.The evidence offered by defendant consists of a stipulation received subject to the objection that it was immaterial and irrelevant. This evidence is that from 1911 to 1913, from 1917 to 1921 and from 1929 to 1931 certain mayors of the city were stockholders and directors of banks, including
At the outset it should be said that the resolutions authorizing the city treasurer to deposit city funds in any one bank upon certain conditions of security and the later designation of defendant bank as one of the sole depositories for city funds were passed by the city council long before Stanley Maly became a councilman. The sole question presented here is whether the First National Bank, of which Stanley Maly is admittedly a stockholder, director, and officer, is prohibited from receiving deposits of city funds because he is now a member of the city council.
It must be conceded that the pleadings present a justiciable controversy under the declaratory judgment act. We have held that the term “person” used in the declaratory judgment act is broad enough to include the state or any subdivision thereof. State ex rel. Smrha v. General American Life Ins. Co., 132 Neb. 520, 272 N. W. 555. In both Dill v. Hamilton, 137 Neb. 723, 291 N. W. 62, and Lynn v. Kearney County, 121 Neb. 122, 236 N. W. 192, this court approved the views expressed in State v. Grove, 109 Kan. 619, 201 Pac. 82, wherein it was said: “It is hardly conceivable that any fundamental principal of our government, beyond legislative control, prevents two disputants, each of whom sincerely believes in the rightfulness of his own claim, but each of whom wishes to abide by the law whatever it may be determined to be, from obtaining an adjudication of their controversy in the courts without .one or the other first doing something that is illegal * * * if he is mistaken in his view of the law.”
We turn then to decision of the important question, whether a bank- deposit constitutes a contract within the prohibitions of the charter and statute. It seems clear un
We find that the question presented must be answered affirmatively. It is said in 7 Am. Jur., sec. 405, p. 286: “The term ‘deposit,’ when used in connection with a banking transaction, denotes a contractual relationship ensuing from the delivery, by one known as the ‘depositor,’ of moneys, funds, or things into the possession of the bank, which receives the same upon the agreement to pay, repay, or return, upon the order or demand of the depositor, the moneys, funds, or equivalent amount, or things, received; this agreement on the part of the bank is usually a tacit one and implied * * * .” Also in 9 C. J. S., sec. 267b, p. 545: “The relation of banker and depositor is created by contract.” This court has held that the relation of banker and depositor can only be created by contract express or implied. State v. Citizens State Bank, 117 Neb. 358, 220 N. W. 593. See, also, Citizens State Bank v. Worden, 95 Neb. 53, 144 N. W. 1064, wherein there appears an affirmance of the contractual nature of a deposit in a bank.
The resolution of the council giving the city treasurer authority to deposit and the designation by the council of defendant bank and others as the sole and only depositories are only resolutions of the council. Such a resolution standing alone is not a contract. The former was simply a grant of authority to the treasurer, and the latter a limitation of his authority naming and designating certain banks of which defendant was only one. The actual deposit of city funds as authorized in a designated bank creates the con
Manifestly the defendant is deriving a benefit or profit from the deposits of the city funds. The defendant in its answer so admitted. As a business institution it could not ordinarily be expected to receive and disburse so large an account without prospect of profit commensurate with the service required. Naturally, any person who was a stockholder, director or officer thereof would be both directly and indirectly financially interested in any contractual arrangement which returned a profit to his corporation. However, we call attention to the fact that if the contract is of a kind prohibited by law it is immaterial whether the officer of the city actually profited from the contract or whether he was actually influenced by his interest. The question is whether there was any contract to which the city or any one for its benefit is a party in which the officer’ of the city was interested directly or indirectly by virtue of an opportunity to benefit or profit therefrom.
In Schenectady Illuminating Co. v. Board of Supervisors of Schenectady County, 151 N. Y. Supp. 830, which was affirmed in 151 N. Y. Supp. 1012, 166 App. Div. 758, it was said: “The contract is unenforceable, not because a public officer has failed in his duty, but because he has some interest in conflict with his duty. The interest referred to is not necessarily a money interest, nor is it an interest sufficiently large to induce a man generally honest to disregard his duty. It may be indirect. It is such an interest as is covered by the moral rule: No man can serve two masters whose interests conflict. Smith v. City of Albany, supra. Too great refinement of reasoning must not be indulged to uphold a contract against this provision of the law on the ground that the interest is so little or so indirect.”
In Hobbs, Wall & Co. v. Moran, 109 Cal. App. 316, 293 Pac. 145, it is said: “Such transactions are held to be void whether they arise from the relationship of an agency which is public, quasi public or private in its nature. The theory of the law is that a councilman or other officer of a city sustains the same fiduciary relationship toward the citizens of his community that a trustee bears to his cestui que trust * * * .”
The statement is made in 44 C. J., sec. 2176, p. 93: “Cases are numerous wherein a municipality was brought into contractual relation with firms or companies, of which a councilman or other city officer was a member, stockholder or employee, and the courts have usually applied the general doctrines to the undoing of such contracts, just as though the officers were individually interested.” As stated in 37 Am. Jur., sec. 274, p. 897, “A charter or statutory provision which prohibits a municipal officer from being directly or indirectly interested in a contract with the municipality has been held to extend to contracts between the municipality and a corporation of which a municipal officer is a stockholder or stockholder and officer. Such a contract is void and incapable of ratification even though the municipal officer has no official connection with the contract and no knowledge of its existence.” See, also, Ferle v. City of Lansing, 189 Mich. 501, 155 N. W. 591, L. R. A. 1917C 1096 and annotation L. R. A. 1917C 1099.
As said in Hardy v. City of Gainesville, 121 Ga. 327, 48 S. E. 921: “A stockholder in a private corporation clearly has an interest in its contracts; and if the city can not make a contract with the officer himself, it can not make it with a corporation in which such officer is a stockholder.” In 2 Dillon, Municipal Corporations (5th ed.), sec. 773, p. 1143, it is stated in somewhat different language, “At common law and generally under statutory enactments, it is now es
We can only conclude that the deposits of the City of Lincoln in defendant bank are prohibited by virtue of section 3, art. VII of the home rule charter and section 15-603, R. S. 1943, while a member of the city council or officer of the city is a stockholder, director or officer of the bank. In arriving at this conclusion we have not overlooked the former executive or administrative construction of the charter and statute presented by defendant. We find that it is immaterial and of no effect under the circumstances presented. In Miller v. Iowa-Nebraska Light & Power Co., 129 Neb. 757, 262 N. W. 855, it was held by this court that: “Resort to contemporaneous construction of a statute by administrative bodies is neither necessary nor proper where the language used is clear, or its meaning can be ascertained by the use of intrinsic aids alone.” Also, it was held in Ehlers v. Farmers Mutual Ins. Co., 130 Neb. 368, 264 N. W. 894: “When the court of last resort has judicially construed a statute, the rule permitting recourse to contemporaneous construction of the statute by administrative or executive officials, charged with the enforcement of such statute, is inapplicable.” See, also, 59 C. J., sec. 607, p. 1022; sec. 613, p. 1036.
We find that the language of the charter and statute is clear and unambiguous. Further both in Village of Bellevue v. Sterba, supra, and Neisius v. Henry, supra, this court has held under a statute, almost identical therewith, that a contract of a city in which an officer thereof has an interest is illegal and void for all purposes. The plain import of such provisions already unequivocally adjudicated cannot
For the reasons heretofore stated the judgment of the district court is reversed and remanded with directions that the trial court enter a judgment finding and adjudging that the deposit of city funds in defendant bank is illegal and void while an officer of the city is either a stockholder, officer or director of defendant bank. An injunction will not be granted since deposits by the city may be discontinued at any time and we assume, as a matter of course, that both the city and the bank will abide by the final decision of the court.
Reversed, with directions.