New Amsterdam Casualty Co. v. Albia State Bank

[3] The cause of action for the recovery of school funds wrongfully paid out by the appellee bank was regularly assigned in writing by Monroe County and the officers thereof to the appellant Casualty Company. The appellee bank pleaded negligence on the part of the county and its officers in the issuance of the check to the county auditor and in the failure of the officers to sooner discover the forgery of the endorsement thereon by said county auditor.

Where the rights of innocent third parties are not involved, the quite universal rule of this state is that school funds are the property of the State of Iowa, whose agents are the officers of the county authorized to administer the fund, and that, consequently, the school fund, being the property of the State, cannot be lost or a cause of action for its recovery impaired by the negligence of the public servants charged with the duty of administering the fund. The appellee bank contends that because the county, through its authorized agents, has assigned to the appellant Surety Company the cause of action held by the State for the recovery of the school fund, therefore, defenses may be raised by the appellee based upon negligence of the agents of the State, so as to defeat the cause of action under the written assignment to the appellant Surety Company, altho the cause of action was admittedly good, had the county, acting for the State of Iowa, been the plaintiff, rather than the appellant. In other words, it is the claim of the appellee bank that the cause of action based upon the written assignment by the county to the plaintiff Surety Company constituted a contract personal in its nature and was not assignable.

No authority has been cited by the appellee in support of this contention. The appellee bank relies upon decisions relating to rights or causes of action which are not assignable, such as the authority of an attorney to represent his client. Antrobus v. Sherman, 65 Iowa 230.

The appellee bank also relies upon the proposition announced and the decisions cited thereunder in 5 C.J. p. 950, Sec. 125. The cases cited under said section 125 may be briefly reviewed: Thwing v. Winkler, 75 P. 1126, 1127 (Okla.), holds that a right of attachment for fraud does not pass with the assignment of the cause of action for damages. The Winkler case, supra, was followed in Thwing v. Humphrey, 75 P. 1127 (Okla.); Weaver v. Lawyers Surety Co., 36 Misc. 635, 74 N.Y.S. 462, holding that the assignment of a claim for goods sold does not pass to the assignee the right to rescind the sale; McQueen v. Chouteau's Heirs, 20 Mo. 222, 64Am. Dec. 178, holding that the assignment of a contract by which one has a right of selection of land does not assign the right of choice; and also the following cases to the effect that the sale of property does not pass the right to reclaim taxes or assessments collected illegally or by mistake from the former owner: Bernays v. Wurmb, 4 Mo. App. 231; Pinchbeck v. Mayor, etc., of the City of New York, 12 Hun (N.Y.) 556; Kitchen v. Conklin, 51 Howard's Pr. Rep. 308 (N.Y.).

It is plain that the sale of property would not transfer a cause of action for the recovery of taxes illegally collected from a transferor, any more than such a conveyance would transfer a cause of action for trespass or other damage to the property occurring before the sale.

Other examples of personal rights which are not assignable may be suggested; for instance, contracts of employment, rights to alimony, or succession to public office.

[4] Clearly the cited precedents by appellee have no bearing on the issue at bar. The established rule that the rights of the State will not be prejudiced or its property lost through the negligence of the public servants is not founded upon a supposed prerogative exempting the State alone from accusations of negligence. As said by Justice Story in the leading case of United States v. Kirkpatrick, 9 Wheaton *720, l.c. 735, 6 L. Ed. 199, which case was discussed in the filed original opinion, 239 N.W. 4:

"The general principle is, that laches is not imputable to the government; and this maxim is founded, not in the notion of extraordinary prerogative, but upon a great public policy."

That this doctrine is not founded upon a prerogative exclusively vested in the State is made apparent by the fact that public agents themselves are not personally liable for merely negligent acts committed within the scope of their official duties, on the legal theory that unless the principal is liable the servant is not liable. This general rule has been stated as follows:

"Public officers, when acting in good faith within the scope of their authority, are not liable in private actions." (46 C.J. 1042).

It is said in Packard v. Voltz, 94 Iowa 277, l.c. 281:

"Legally, the county justifies, in that it has done no act for which it is liable, and hence its agent, through whom it did the act, is for the same reason justified."

Therefore, as to all acts which, if done by the principal, the principal would have been justified, no liability exists against the public agent. Many examples of the above legal doctrine are available to illustrate the foregoing rule as to the non-liability of the State.

A superintendent of banking has been held not liable for negligently closing a bank without proper cause, when he did so without intention to do wrong. Sanders State Bank v. Hawkins, 142 S.W. 84 (Tex.).

The director of a school district has been held not personally liable for injury resulting from the explosion of a pressure tank on a school ground inasmuch as he was a public servant and not liable for merely negligent feasance or nonfeasance in office. Antin v. Union High School District, 280 P. 664 (Ore.).

A securities commissioner has been held not personally liable for permitting stock to be sold in the state, when he did so without fraudulent intent. Minter v. McSwain, 119 S.E. 901 (S.C.). Accord: McClellan v. Carter, 117 S.E. 118 (Ga.); Overmyer v. Barnett, 123 N.E. 654 (Ind.); Gearin v. Marion County, 223 P. 929 (Ore.).

Thus it is seen that for reasons of public policy, negligence cannot be found to exist so far as it concerns the administration of public property. The rule is not merely that negligence cannot be pleaded against the State, because of its supposed prerogatives; for it is held that no cause of action exists even against the agents of the State for mere negligence committed within the scope of their official duties. It follows of necessity that this doctrine is not merely one of pleading or of adjective law, but is one of substantive law, and likewise that in transactions participated in by the State and its agents within the scope of their official authority, negligence in the administration of public property cannot be found to exist. To hold otherwise in this case would be to hold that the State was powerless to assign a cause of action which was admittedly good in itself, merely because an agent of the State has been accused of negligence in the transaction from which the right arose. Such a conclusion would result in a diminution in the value of claims held by the State for the recovery of the school fund for the reason that, as in the cause at bar, a favorable settlement was made by the State with the appellant, because of the fact that the State had a valuable claim to assign for the recovery of its funds.

The petition for rehearing is overruled.