Montana Attorney General Opinion 16-128

Opinion No. 128. Banks and Banking-Public Moneys -Deposits-Ratable Deposits-Serv- ice Charges-Federal Loans. HELD: 1. Funds received from the Federal Government for the sale of county, city, school dsitrict or irri- gation district bonds or government grants for the purpose of construct- ing a court house, city hall, school buildings, irrigation or water systems, are public moneys and must be de- posited ratably among all qualified banks under Chapter 23, Laws of the Extraordinary Session, 1933-34. 2. Counties, cities, school districts and irrigation districts are not per- mitted to pay depository banks a serv- ice charge for handling such accounts. Hon. Frank H. Johnson State Examiner The Capitol June 20, 1935. You have submitted the following: "I. Will you please render your opinion as to whether or not the fol- lowing moneys deposited in the de- pository banks by county or city treasurers must be deposited rata- bly and if a uniform rate of interest must be paid on such deposits as provided by Chapter 23 of the Ex- traordinary Session Laws of 1933- 34: "Funds received from the Federal Government from the sale of county, city, school district or irrigation dis- trict bonds or government grants for the purpose of constructing a court house, city hall, school build- ings, irrigation or water systems. "These funds are placed in a spe- cial account in a bank, approved by the Federal Public Works Board, by the county or city treasurers and are paid out only by warrants issued by the Board of County Commissioners, City Council, School Trustees or Ir- rigation District Commissioners. "2. Also would the county, City, school district or irrigation district be permitted to pay the bank a serv- ice charge for handling such ac- count; if so, how would they pay same." Section 4767, as amended by Chap- ter 23, Laws of 1933-34, Extraordi- nary Session, makes it the duty of all county, city and town treasurers to deposit all public moneys in their pos- session and under their control, in solvent banks in the county, city or town of which such treasurer is an officer, such deposits to be distributed ratably among all of such banks qual- ifying therefor and said deposits shall bear uniform interest at the rate of not more than 2% per annum, payable. quarter annUally. It also provides for- the giving of security for such por- tion of the deposits as is not guaran- teed or insured according to law. The question is whether the funds you mention are "public moneys" within the meaning of this section. Section 11320 defines public moneys as follows: "The phrase 'public mon- eys,' as used in this code, includes all OPINIONS OF THE ATTORNEY GENERAL 129 bonds and evidences of indebtedness, and all moneys belonging to the state, or any city, county, town, or district therein, and all moneys, bonds, and evidences of indebtedness received or held 'by state, county, city, or town officers in their official capacity." Our Supreme Court in State v. Mc- Graw, 74 Mont. 152, after quoting this definition, said, page 158: "Aside from the Code definition and provi- sion quoted, it is generally held that it is the official character in which mon- eys are received, and not the ultimate ownership, which makes them 'public moneys.' (People v. Hamilton, 3 Cal. Unrep. 825, 32 Pac. 526; Agoure v. Peck, 17 Cal. App. 759, 121 Pac. 706; Myers v. Board of Commrs., 60 Kan. 189, 56 Pac. 11.) In the first case cited, the court said: 'The allegation that these moneys were received by the defendant 'in his official capacity' is the allegation of a fact which con- clusively fixes their character as 'public moneys.' In the second it was held that: 'The court then having ac- cepted in its treasury the $1,000 in- volved and adjudged it to be a money deposit in court, the law requires the clerk to pay the same into the hands of the county treasurer, and the same when received by the treasurer in his official capacity became public mon- ey'." Tested by the statute and the lan- guage used by our court, the funds in question must be considered as pub- lic moneys as they not only belong to the county, city, school district or ir- rigation district but they are received by the respective treasurers in their official capacities. These funds, there- fore, must be distributed ratably among all of the banks according to statute qualifying therefor and must be secured as required by statute and shall bear interest at the rate not to. exceed 2% per annum, payable quar- terly. Answering your second question re- garding service charges, when a de- posit of public moneys is made in a depository bank a contractual rela- tionship in the nature of creditor and debtor arises as between the public body and the depository bank. The terms of this contract are fixed by statute and each party is bound by the law. It is the statutory duty of the depository bank to pay the inter- est and it is the statutory duty of the county, city or town treasurers to collect the same. The depositing public body and the depository bank cannot enter into any private con- tract in derogation of the laws of the state which apply to the depositing of public funds. The legislature has placed the bur- den of paying this interest upon the depository bank. If the bank, in turn, were permitted to charge the public bodies a service charge then the bank would in fact be requiring the tax- payers to assist them in paying the interest. It was not the intent of the legislature to place the burden of pay- ing such interest upon the taxpayers of this state as no provision was made therefor .. The legislative intent was to require the bank that had the use of these public deposits for com- mercial gain, to pay this interest. If the banks could legally make a rea- sonable charge to the public bodies they could also fix this service charge at a rate equal to the interest they are required to pay. Such a policy would circumvent the statutes of this state and place the entire burden up- on the depositors. Moreover, there is no levy authorized by law whereby public bodies could raise such a fund by taxation. It is, therefore, my opinion that counties, cities, school districts and irrigation districts are not permitted to pay depository banks a service charge for handling such accounts.