METROPOLITAN WATER DIST OF SOUTHERN CALIFORNIA v. ADAMS

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District Court of Appeal, Fourth District, California.

METROPOLITAN WATER DIST. OF SOUTHERN CALIFORNIA v. ADAMS et al. and three other cases.

Civ. 3460–3463.

Decided: December 17, 1947

James H. Howard and Charles C. Cooper, Jr., both of Los Angeles, and H. L. Thompson, of Riverside, for appellant. W. Earl Redwine, County Counsel for the County of Riverside, of Riverside, for respondents.

These appeals are from orders made after judgment, the matters having been heard together in the trial court and being here presented on one set of briefs.

In these actions, originally, the appellant sought to condemn certain lands in Riverside County for its use as a reservoir site. For the purpose of obtaining immediate possession of the property large sums of money were deposited in court by the appellant as security for the payment of such awards as might be made to the landowners. All of these funds were deposited with the clerk and by him deposited with the county treasurer, who then deposited them in his several bank accounts and commingled them with the rest of his bank funds. The principal sums so deposited in court were all paid to the landowners, or returned to the appellant pursuant to orders of the court in the several actions. Such orders for return were made in response to appellant's applications and were in the exact amounts represented by it, and found by the court, to be the remaining balance to which it was entitled.

Over the years in question the treasurer had received certain interest from the banks upon his bank funds which, at various times, included all or portions of the funds thus deposited in court by the appellant. Some years after the original judgments had become final and had been satisfied, and long after the remaining balances had thus been returned to it, the appellant filed in these actions further applications for orders for the return to it of any interest earned on the funds thus deposited in court and later deposited by the county treasurer in his bank accounts, alleging that the appellant was the legal or equitable owner of these funds; that a proportionate share of the interest earned by the treasurer's bank accounts inured to the benefit of the appellant; that such share of this interest constituted and remained accretions to the appellant's funds as deposited in court; and that these interest accretions constitute deposits in court for which the clerk, the county treasurer and the county auditor, upon order of the court, must account to the appellant. The applications further set forth, in each instance, the amount claimed to be due to the appellant, on a proportionate basis.

The clerk of the court, the county treasurer and the county auditor were ordered to show cause why orders should not be made directing the return to the appellant of such amounts as might be found by the court to constitute the amounts of interest earned on, and accruing to, the funds which it had deposited in court.

The clerk, treasurer and auditor appeared and filed returns or answers and a hearing was had, at which evidence was presented by both sides. It appears that all of the deposits thus made in court by the appellant were turned over to the county treasurer and by him deposited in various banks in both active and inactive bank accounts maintained by him; that these deposits were commingled with other funds in that bank account; that during the period in question he deposited funds in his control in 18 different banks; that he took out various amounts at various times and from time to time transferred funds from inactive accounts to active accounts, and vice versa; that varying rates of interest were received at different times and from different banks; and that it was impossible to identify or trace the particular funds deposited in court by the appellant or to determine the exact amounts of interest received by the county treasurer for the use of these specific funds for the various periods. Evidence was received, however, showing the total amounts which the treasurer had on deposit in various banks in various periods; the amounts received as interest thereon by the treasurer; and the amounts coming from these courts deposits which were in the hands of the treasurer at various periods. From this evidence the appellant contends that the amounts due it can be determined, on a proportionate basis, with reasonable accuracy.

The trial judge filed a memorandum decision in which he stated that the clerk, the county treasurer and the county auditor had complied with all orders of the court, that any remaining balances on the original deposits in court had been returned to the appellant, that the judgments had become final, and that no monies remain which belong to the appellant as a part of said deposit monies. The opinion was then expressed that if, as claimed, there now remains in the county treasury any interest on these funds to which the appellant is entitled, it must secure recovery thereof in a separate action brought against the proper parties. An order was then made in each action denying the application for an order for the return of any such monies to the appellant and discharging the order to show cause. From these orders, respectively, these appeals were taken.

Appellant's general theory is that the interest earned on these court deposits constitutes profits from the use of trust funds which were owned by the appellant, that these profits are ‘incremental accretions' to those trust funds which were held by the treasurer solely as an officer of, and as custodian for, the court, and that the accretions, as a part of the court deposits, should be returned to the appellant. It is argued that the interest in question was earned by funds owned by the appellant and became part of that fund; that these funds were never in the custody of the county but were held by the treasurer as custodian for the court; that in depositing these funds in the bank the county treasurer did not represent the county; that under the Depositary Act, Gen. Laws, Act 2834a, he had no authority to deposit these funds in banks unless they are to be considered monies belonging to the appellant as a public or municipal corporation; that unless he represented the appellant as a public corporation he was not, in making the deposits, representing any entity specified in section 2 of the Depositary Act ad entitled to interest; that, actually, the treasurer was not representing either the county or the appellant but was representing the court; that in any event the common law rule, that the interest follows the trust funds, applies; and that this is recognized by section 2 of the Depositary Act which states that the interest shall go to certain public bodies ‘except where the law otherwise directs.’ It is, therefore, argued that if the county treasurer was authorized by the depositary law to deposit these funds in banks the interest remains a part of the funds and goes to the appellant under the terms of that act, and that if the placing of the funds in the banks was not authorized by the Depositary Act they were unlawfully deposited and, being trust funds owned by the appellant, the interest belongs to it. It is further argued that the court had jurisdiction to afford relief to the appellant here since this interest became a part of the deposits made in court, which could only be disposed of on orders of the court; that the court has continuing jurisdiction to dispose of the fund as long as any part remains; that this can be done through special orders after final judgment; and that under the method used the evidence discloses the amounts due to the appellant with sufficient accuracy to justify a reversal with directions to enter orders directing a return of those amounts to the appellant.

If the interest in question became and remains a part of the funds deposited in court, as an accretion thereto, it would seem to follow that the court has a continuing jurisdiction to dispose of the entire fund, and that the trial court erred if it believed that separate actions would then be necessary to dispose of the questions presented. Regardless of the reason given by the court for its orders, we are here concerned with the orders as made, and with whether or not the orders denying this relief to the appellant are in accordance with the law and the facts.

If the funds thus deposited in court were purely trust funds, of which the appellant was the owner, and if there is no statute to the contrary, it might well be assumed that the resulting interest would followed the principal in the matter of ownership. Factually, the situation here is somewhat different and these funds were not merely trust funds in the ordinary sense and as subject to usual trust rules. They were deposited in court in order to obtain an immediate and valuable benefit to the appellant, and it not only parted with possession of the funds but to a large extent changed the character of its ownership thereof. While, in a way, it remained the owner that ownership became qualified and conditional and, in a practical sense, some rights and interests passed to the landowners. The control of the funds was temporarily in the hands of the court and, during a large part of the time while interest was being thus earned, no one knew who was or would be the real owner of parts or all of the fund. It was never contemplated by the parties that all of the fund would be returned to the appellant, although theoretically this was possible, and actually very little of it was so returned.

The appellant relies on the case of Southern Oregon Co. v. Gage, 100 Or. 424, 197 P. 276, where the question arose as to who was entitled to interest on funds deposited in court and thereafter, pursuant to statute, deposited in banks. The litigation was over the payment of certain taxes, and it was held that the taxes had been illegally assessed and the plaintiff had secured a return of the money deposited. The situation n there was quite different from that of the instant case since the statute under which the money was deposited provided only that interest be paid on money belonging to the county and since, as the court pointed out, the plaintiff not only owned the money but had been illegally deprived of its use and ought, in justice, to receive the interest which had been actually paid for its use while he was deprived of its possession.

Irrespective of what rules would otherwise apply a different situation existed here because of a compliance with certain statutes which affect the funds which were thus deposited in court by the appellant for a specific purpose, beneficial to it, as permitted by section 14 of Article I of the Constitution. Section 573 of the Code of Civil Procedure provides that money so deposited in court must be delivered to the clerk who must ‘deposit such money with the county treasurer, to be held by him subject to the order of the court. The treasurer must keep each fund distinct, and open an account for each. For the safekeeping of the money deposited with him the treasurer is liable on his official bond.’

Section 188 of that code provides, with respect to any such deposit in court, that the money shall be deposited with the county treasurer who shall give a duplicate receipt to the county auditor, and that any order of court directing the payment or withdrawal thereof ‘shall require the auditor to draw his warrant therefor and the treasurer to pay the same.’

The Depositary Act (Deering's Gen.Laws, Act 2834a) provides, in section 1, that all monies belonging to or ‘in the custody’ of any county, city or other public or municipal corporation shall, so far as possible, be deposited in banks; that any sum so deposited shall be deemed to be in the treasury of such county, city or other public or municipal corporation; and that the banks in which such funds are deposited shall pay certain interest thereon. Section 2 of that act provides that the interest paid by any such bank shall be on the average daily balances of the monies kept on deposit therewith, that the treasurer shall give a statement to the banks and to the county auditor, or the corresponding officer of any other public or municipal corporation, showing the amount of accrued interest for each bank for each quarter, and that ‘interest on all moneys deposited as herein provided for shall belong to and shall be paid quarterly into the geneal fund of the county, city and county, city, town, municipality or other public or municipal corporation represented by the officer making such deposit, except where the law otherwise directs.’

While the problem here presented is novel, insofar as any previous decisions are concerned, the solution depends upon the meaning and effect of these statutes. The law requires any money thus deposited in court to be deposited with the county treasurer and the Depositary Act requires any money which is in the custody of the county to be deposited in banks. The ownership of the interest thus produced in this instance is the matter here in controversy. As we view the matter, two of the questions presented are controlling. The first of these is as to whether these funds, thus deposited in court and turned over to the county treasurer in accordance with law, should properly be considered as being monies ‘in the custody of’ the county of Riverside, within the meaning of Section 1 of the Depositary Act.

While money thus deposited in court remains in the legal custody of the court and subject to its orders, the actual custody is placed elsewhere under the provisions of statutes designated to furnish a method for safely keeping the money, for which the court obviously has no facilities. Section 573 of the Code Civ.Proc. provides that it must be deposited with the county treasurer, ‘to be held by him’ although subject to the court's order, that the treasurer must open and keep an account therefor, and that he is liable on his official bond. Section 188 of that code also provides that the treasurer shall give a receipt to the county auditor, and that any withdrawal from the deposit shall be made on the warrant of the county auditor. There is no question that such deposits with the county treasurer are made with him in his official capacity and not personally, and these statutes call for a number of official acts on the part of both the county treasurer and the county auditor. It seems clear that the purpose of these acts is to make available all of the facilities and safeguards of the county treasury, including the legal control surrounding the official acts of the county treasurer and county auditor, for the protection and safekeeping of such funds while under the control of, and awaiting disposition by, the court. While the money is at all times subject to the order of the court it is in the actual custody of the county treasurer in his official capacity, and he and the auditor are acting, with respect to it, as county officers in accordance with the duties imposed upon them by law. While it is in this actual custody it can only be considered as being in the county treasury, although these precise words are not used in the statute. This is recognized by the Depositary Act, while provides that after any money in the hands of the treasurer is deposited by him in banks it shall still be deemed to be in the county treasury. The treasurer is in charge of what is usually regarded as the county treasury and was here acting in his official capacity and, in a very real sense, was acting as a county officer and for the county. It would require an unnecessarily narrow and strained construction of the statutes to hold that funds thus deposited with the county treasurer, as such, were not in the custody of the county, within the meaning and intent of section 1 of the Depositary Act, merely because the treasurer while acting in his official capacity was also performing a duty for the court, as required by law, and because the court retained control over the ultimate disposition of the funds. The custody referred to in section 1 of the act is the actual custody, with the duty of handling the money, and not merely the legal or technical custody thereof.

These funds being in the custody of the county and lawfully deposited in banks the Depositary Act provides that any interest earned shall go into the general fund of the public body represented by the officer who made the deposit. This presents a second question as to what public body was represented by the treasurer, in making these deposits. That is, whether he was representing the county, or was representing the appellant as a public or municipal corporation, within the meaning of the act.

In a way the treasurer was representing both the court, which had control of the disposition of the money, and the county which had custody of it and was charged with the duty of safeguarding it. In another and more indirect way he represented the ultimate owners of the funds, including the landowners as well as the appellant. Under the circumstances, the ultimate ownership of the funds cannot be the controlling element.

The situation here is different from that involved in Pomona City School Dist. v. Payne, 9 Cal.App.2d 510, 50 P.2d 822. In that case, involving interest on school funds deposited in the county treasury, it was argued that since the deposits were made in the banks by the county treasurer the county was the public body which he was representing in making the deposits. It was held that this was too narrow a construction of the language used in the statute and that, in making the deposits, the county treasurer represented the school district. This was held not merely on the basis of the ultimate ownership of the funds, but because of the situation existing at the time the funds were deposited and which continued to exist while the funds remained in the custody of the county. In that case the money was collected and placed in the custody of the county as school money belonging to the district, it was at all times subject to removal and use by the school district, and the treasurer was acting throughout as the agent and ex officio treasurer of the district. It was accordingly held that, in making the deposits, the treasurer represented the district within the meaning of the act.

In the instant case, this was not money coming into the custody of the county merely as a sort of treasury for the appellant district. The appellant had its own treasurer and treasury, and these funds had been removed from that treasury and used for a purpose beneficial to the district. Having been so used, they subsequently came into the custody of the county through statutory requirement, and while in such custody the money was not presently subject to removal or control by the appellant. In depositing the money the treasurer was not acting as ex officio treasurer of the appellant district and in no direct sense was he acting as its agent. Any indirect agency that existed was as much, or more, for the landowners as for the appellant.

In such a case as this, the treasurer represents both the landowners and the condemnor in a general and indirect way, but not in the sense referred to in the Depositary Act. Even in such an indirect sense, the treasurer here represented the appellant as a litigant who had deposited money in court and not as a public or municipal corporation. While the treasurer also represents the court and is subject to its orders, that is not the kind of representation contemplated by section 2 of the Depositary Act. In depositing such money in banks the treasurer is acting in his official capacity, in handling funds which the court has placed in the custody of the county and in its treasury, and in so doing he is acting directly as county treasurer and is representing the county and its treasury.

It would reasonably seem for follow that under these circumstances the county is the only public body which is ‘represented by the officer making such deposit’, as intended by section 2 of the Depositary Act. In any event, it must be held that the appellant district was not the public body so represented, within the meaning of that act. The common law rules relating to trust funds are not applicable in the face of these statutes, and under the terms of the Depositary Act the appellant is not entitled to any interest collected by the county treasurer. We conclude, therefore, that the court correctly denied this relief to the appellant.

The order appealed from, as to each of the action, is affirmed.

BARNARD, Presiding Justice.

MARKS and GRIFFIN, JJ., concur.