Opinion
No. 26026
November 30, 2005
Appeal from the Circuit Court of Greene County, Honorable J. Miles Sweeney, Judge.
David M. Harris, Trae D. Meyr and M. Sean McGinnis, for Appellant.
Thomas J. O'Neal and John C. Holstein, for Respondent.
Edward D. Jones and Company, L.P. ("Edward Jones"), a Missouri limited partnership, registered to conduct business as a securities broker/dealer, appeals the trial court's granting of a motion for summary judgment in favor of Christian County, Missouri ("the County").
On June 19, 1996, Gary Melton ("Melton"), the then Christian County Treasurer met with Steve Askren ("Askren"), an investment representative, at the Springfield, Missouri branch office of Edward Jones, to discuss the possibility of opening an account for the County. He told Askren that he had recently attended a meeting with other county treasurers from Missouri and that an idea was presented to them about the possibility of earning higher rates of return on monies they were allowed by statute to invest in other options, "like corporate accounts." They discussed what services Edward Jones had to offer and which accounts would earn a higher rate of interest on county funds. Melton stated that the reason he wanted the account was to get a "higher rate of return," and that he would need to have "accessibility to the account." Askren told Melton that he would have the ability to write checks on the account, and that he could call Askren's office and have funds moved to other accounts. Askren also told him that he could have "funds disbursed by wire transfer" and "that it was just simply a money market account."
An account under the name "Christian County Building Fund" ("the Account") was opened on June 19, 1996. On June 21, 1996, the Account was changed to show the customer as "CBF" in care of Gary Melton at the Christian County Courthouse on a form entitled "Unincorporated Association Account Form." The use of that form was directed by someone in the new accounts department of Edward Jones after Askren told them he was opening an account for Christian County and was speaking with the treasurer, or words to that effect. That form, signed only by Melton, stated, in part, that "we, the undersigned 1 (number) individuals (hereafter sometimes referred to as Members), have joined together to form an unincorporated association known as the: CBF," and that Edward Jones "is hereby appointed Depositary for the Association to hold for the Association as an entity any securities or mon[ies] purchased or deposited by the Association as an entity and never under any circumstances to the individual members as such." The form also stated that Melton was the agent and attorney in fact for the Association and authorized Edward Jones "to follow the instructions of said agent in every respect concerning the Association's account with you."
Melton, on or about June 21, 1996, delivered a check in the amount of $650,000, which was drawn on the County's account at the Ozark Bank, which had previously been selected by the County as its depositary for the County funds. The check was payable to Edward Jones and was deposited in the Account set up by Melton.
At all times before and after June 19, 1996, the sole depositary for county funds selected according to the procedure provided in Chapter 110, RSMo, was the Ozark Bank.
When the check was presented to the Ozark Bank for payment, an official with that bank contacted Christian County Presiding Commissioner Joe Nelson ("Presiding Commissioner Nelson"), and asked him if he knew anything about the check and if the bank should honor it. Presiding Commissioner Nelson did not have any knowledge of the check and proceeded to get in contact, by telephone, with two other commissioners. He was only able to reach Commissioner William Barnett ("Commissioner Barnett") and asked him if he would meet him at the Christian County Prosecuting Attorney's Office. In the meantime, Presiding Commissioner Nelson went to the Ozark Bank and met with two bank officials who showed him a copy of the check written to Edward Jones from county funds. Presiding Commissioner Nelson went directly to the Christian County Prosecuting Attorney's Office and met with Prosecuting Attorney Mark Orr ("P.A. Orr") and Commissioner Barnett where he told them about the meeting with the officials at the Ozark Bank and about the check written by Melton. P.A. Orr told them that for legal purposes and "possible ramifications of whatever agreement that [Melton] could have made with [Edward Jones]," they should allow the check to go through. Presiding Commissioner Nelson then called the Ozark Bank and directed them to "honor the check because of possible legal consequences." Ozark Bank honored the check and the proceeds were placed in the Account set up by Melton with Edward Jones.
For nearly two weeks, the funds sat in the Account and the County never contacted Edward Jones or any of its representatives concerning the Account. On July 2, 1996, Melton orally directed Edward Jones to electronically transfer funds from the Account to other accounts not owned by the County. Those included transfers of $350,000 on July 2, 1996, to Melton's account at Metropolitan National Bank, $275,000 on July 3, 1996, to the same account, as well as several other accounts at different banking facilities. Edward Jones complied with those requests, and Melton converted those funds for his own personal use.
At some point, the County discovered that Melton had misappropriated the funds in the Account for his own personal use and it pursued collection to recover a portion of the funds. Edward Jones refunded to the County the sum of $24,995. The County was able to recover the amount of $256,207.72 of the funds from other banking facilities, the sale of Melton's property, and other money from Melton. After applying the credits, there remains a loss to the County of $368,837.28, plus interest.
On March 8, 2000, the County filed a petition to recover the funds being held by Edward Jones from the Account. It alleged, inter alia, that the County is subject to and authorized to open bank accounts exclusively as provided in Section 110.130, et seq. and that those statutes were not followed in opening the account in question; that Edward Jones took possession of the County's money "as a [ trustee] ex-maleficio, and since that date has held said monies as [ trustee] ex-maleficio and has converted the same to its own use"; that it had been damaged in the amount of $370,279.41; and it requested a judgment in that amount plus interest from June 21, 1996.
All references to statutes are to RSMo (1994) unless otherwise indicated.
The County, subsequently, filed a motion for summary judgment. Edward Jones filed a response to that motion, and later filed its own motion for summary judgment. On September 23, 2003, the court entered its judgment finding in favor of the County on its motion for summary judgment. Pursuant to a motion filed by Edward Jones, the trial court vacated the judgment pending a hearing. Thereafter, the trial court entered a judgment on December 8, 2003, granting the County's motion for summary judgment, denying Edward Jones' motion for summary judgment and entered judgment against Edward Jones in the amount of $368,837.28, "with simple interest at the lawful rate of 9 [percent] from the date of conversion, for a total of $601,204.80 and costs."
In its judgment granting the County's motion for summary judgment, the trial court held, inter alia, that in June and July 1996 the authorized depositary for the County's funds was the Ozark Bank; in opening the Account in question, Edward Jones, which is not a bank, did not submit a bid or proposal to be the depositary of the County's funds as required by Sections 110.130-140; from the date of receipt of the County's funds on June 21, 1996, they were "unlawfully retained and disposed of by [Edward Jones] and at all times since said receipt, [Edward Jones] rights to said money was solely that of a trustee ex malifecio and [Edward Jones] was at all times obligated to return said funds to [the County] but has not done so"; the transfers of funds from the Account were made without Edward Jones requiring a check signed by the county treasurer in violation of Section 110.240; after allowing all just credits and setoffs, there was a balance of $368,837.28 that had not been refunded or returned to the County and it entered judgment in that amount plus interest. Edward Jones appeals from that judgment.
In an appeal from a summary judgment, the Missouri appellate court reviews the record in the light most favorable to the party against whom judgment was entered, according that party the benefit of all reasonable inferences from the record. ITT Commercial Fin. Corp. v. Mid-America Marine Supply Corp. , 854 S.W.2d 371, 376 (Mo. banc 1993). The propriety of summary judgment is purely an issue of law. Id. As the trial court's judgment is founded on the record and the law, an appellate court need not defer to the trial court's grant of summary judgment. Id. The purpose of summary judgment is to identify cases where there is no genuine dispute as to the facts and the facts as admitted show a legal right to judgment for the movant. Id. at 380. To defeat a motion for summary judgment, the non-movant need only show that there is a genuine dispute as to the facts underlying the movant's right to judgment. Id. at 381-82. In this case, the points on appeal indicate that the dispute is not whether there were genuine issues of material fact, but rather whether, given those facts, the County was entitled to a judgment as a matter of law.
In its first point on appeal, Edward Jones contends that the trial court misapplied the law in entering summary judgment for the County for failure to comply with Section 110.130, et seq., which outlines the procedures a county must follow in selecting a depositary for the county's funds. Edward Jones argues that Chapter 110 only creates duties and liabilities for banks that hold county funds, and that it is a limited partnership and securities broker/dealer and not a bank under Missouri law.
Sections 110.010-.060 relate to depositaries of public funds generally. Sections 110.130-.270 relate to depositaries of county funds. These statutory provisions refer to banking institutions, depositary banking institutions, depositary banks and trust companies, banks or trust companies wherein any deposits of private or public monies shall be made, banking corporations or associations, and banks in providing the procedures for the selection of depositaries for public money. For instance, Section 110.130 requires a county to receive proposals from banking corporations or associations which desire to be selected as the depositaries of county funds; Section 110.140 provides for the procedure a banking corporation or association is to follow in submitting a bid to become a depositary; and Section 110.150 provides for the selection of a banking corporation or association as the county depositary. Section 110.240 provides that no money belonging to the county shall be paid by any depositary except upon checks of the county treasurer.
Edward Jones argues that Chapter 110 creates duties only for banking and trust companies that become depositaries of county funds. It theorizes that "[b]ecause it is undisputed that Edward Jones is not a banking institution, the trial court erred as a matter of law in entering judgment against [it] for violation of a statute that, by definition, does not apply to [it]." What the trial court held was that the opening of the Account, and Edward Jones' acceptance of funds in that Account, was not authorized under the provisions of Sections 110.130-.140 by the submission of a bid or proposal to be a depositary for county funds by a bank and was unlawful, and that Edward Jones violated Section 110.240 by paying out county funds without a check signed by the county treasurer. Because Edward Jones was not a depositary selected pursuant to statutory provisions, the trial court held that the funds were unlawfully retained and disposed of by it, and its rights to the funds was as a trustee ex malifecio by reason of which it was obligated to return the funds.
Sections 110.010 to .060 and 110.130 to .270 provide the procedures for selecting depositaries in which county funds are required to be deposited. Without reviewing all of the requirements of that process, it is sufficient to note that Edward Jones had not been selected, and had not qualified, as a depositary of the County's funds pursuant to the relevant statutory provisions. Whether it could have ever so qualified is not necessary to our analysis. Certainly, the treasurer was not authorized to make a unilateral designation of a depositary for the County. In re Cameron Trust Co. , 51 S.W.2d 1025, 1027 (Mo. 1932). Likewise, a county has no lawful right to deposit county funds except in a county depositary. Ralls County v. Commissioner of Fin. , 66 S.W.2d 115, 116 (Mo. 1933); Huntsville Trust Co. v. Noel , 12 S.W.2d 751, 754 (Mo. 1928).
Everyone dealing with public officials and public funds is charged with knowledge of the statutory provisions concerning the requirement that they be deposited in a properly chosen depositary. Marion County v. First Sav. Bank of Palmyra , 80 S.W.2d 861, 863 (Mo. 1935); In re Cameron Trust Co. , 51 S.W.2d at 1026. A deposit of a county's funds in other than a properly chosen and qualified depositary is unlawful and such funds are wrongfully obtained. Huntsville Trust Co. , 12 S.W.2d at 754. Consequently, the funds are held in trust by operation of law. Id. The entity receiving such funds is classified as a trustee ex maleficio. Marion County , 80 S.W.2d at 865; In re Cameron Trust Co. , 51 S.W.2d at 1027. A trustee ex maleficio is described as "[a] trustee from wrongdoing; the trustee of a trust arising by operation of law from a wrongful acquisition." Lucas v. Central Missouri Trust Co. , 166 S.W.2d 1053, 1056 (Mo. 1942) (citation omitted). Such a trustee never obtains legal title to the funds wrongfully placed with it. Marion County , 80 S.W.2d at 865; Ralls County , 66 S.W.2d at 116. A bank receiving county funds from the county treasurer without being a legal county depositary, and thus becoming a trustee ex maleficio, can only be relieved of its absolute liability by restoring the funds to the county and may not presume that the county treasurer in withdrawing the funds would make a proper disposition of them. Fidelity Deposit Co. of Maryland v. People's Bank , 44 F.2d 19, 20-21 (8th Cir. 1930).
Edward Jones argues that its acceptance of the County's funds does not implicate the above authorities because it is not a banking corporation, association, or institution, i.e., it is not an entity described in the statutes requiring that a county choose depositaries for its funds, and providing the procedures to comply with that selection process. It says, in part, that "Chapter 110 is designed to outline the duties and responsibilities of counties and banks when, and only when, those banks choose to become depositaries for the county. In other words, this Chapter does not, by its express terms, create duties for any person who receives and holds money from a county, but only duties for banking institutions that receive and hold money for a county." In other words, as we perceive Edward Jones' argument, it contends that since Chapter 110 authorizes only banking corporations to act as county depositaries, and since it is not such an entity, its acceptance of the County's funds without being a properly selected depositary does not carry the same ramifications described in the above authorities. Accordingly, it argues that it should not be considered a trustee ex malifecio. It cites no direct authority for that proposition other than noting the references to banks, banking institutions and banking corporations in Chapter 110, as well as the fact that the above authorities involved banks that had not been properly selected as depositaries.
We do not interpret the judgment in dispute here as resulting from a misapprehension about the type or character of Edward Jones' legal existence. In fact, the trial court found that Edward Jones was not a bank. Likewise, the judgment did not arise from a theory that Edward Jones was a depositary of the County's funds pursuant to Chapter 110. Rather, we perceive that the judgment was based on the lack of a genuine issue of fact that Edward Jones accepted the County's funds without qualifying as a depositary under the statutes, and therefore rather than holding those funds as part of a debtor and creditor relationship, it did so as a trustee without acquiring title to the deposited money.
Edward Jones knew that Melton was the Christian County Treasurer when this account was opened, and that it was opened in the name of the "Christian County Building Fund." It clearly was not the properly selected depositary for the County funds. We are cited to nothing indicating affirmatively that under these circumstances a bank would be charged with notice that public funds such as this must be deposited in a properly chosen depositary, but that an entity such as Edward Jones would not be charged with such notice. Likewise, we are cited to no authority holding that under these circumstances Edward Jones accepted these funds as something other than a trustee ex maleficio.
It is true that the authorities cited above involved banks that had not qualified as depositaries of public funds. Does that translate into a conclusion that a non-bank accepting public funds without being chosen and without having qualified as a depositary pursuant to Chapter 110 is freed from the liability imposed on banks that have not qualified? We think that it obviously does not. The factual significance of the above authorities is not that they involved banks while Edward Jones is not such an entity. Rather, it is that an entity accepted the deposit of public funds without being selected and without qualifying as a depositary. In many ways, Edward Jones was acting as a banking institution by accepting the deposit of funds, agreeing to pay interest, and making the funds available for use or transfer. We can perceive no factual or legal reason why Edward Jones did not accept those funds with notice of the law requiring that public funds be deposited in a properly chosen depositary, and that since it was not such a depositary it accepted them as a trustee ex maleficio. It strains credulity to suggest that a bank that accepts public money without having been properly chosen and without having qualified as a depositary pursuant to Chapter 110 takes it as a trustee ex maleficio, but that others accepting similar funds without being a statutorily selected depositary can do so without being exposed to the same ramification. We are unable to reach the conclusion espoused by Edward Jones in this point. Point I is denied.
In its second point, Edward Jones contends that the award of prejudgment interest to the County was an erroneous application of the law because Section 110.130, et seq. does not provide for prejudgment interest and under Missouri law prejudgment interest is available in statutory claims only where the statute expressly provides for recovery of interest. Thus, Edward Jones argues that since Chapter 110 does not provide for prejudgment interest, none may be recovered. This contention proceeds on the assertion that this is a statutory claim arising, if at all, from the express provisions of Chapter 110. As seen in our discussion of the prior point, however, this contention is ill conceived.
The County's petition included a claim that Edward Jones converted the County's funds, and the judgment entered by the trial court clearly so found. As indicated earlier, everyone dealing with public officials and public funds is charged with notice of the statutory provisions relating to the requirement that they be placed with a properly selected depositary. See In re Cameron Trust Co. , 51 S.W.2d at 1026. A deposit made with an entity in violation of those statutory provisions "is utterly void, and all parties thereto are parties to an illegal contract, and such a contract could not be entered into in good faith." Id. As stated earlier, banks, not having been selected as a county depositary, receiving county funds that were subsequently wrongfully applied by a county official, became trustees ex maleficio and their "absolute liability could be relieved only by restoring the funds to the county." Fidelilty Deposit Co. of Maryland , 44 F.2d at 20. There, the banks "in becoming [ trustees ex maleficio] lost their right to presume that the county treasurer in withdrawing the funds would make proper disposition thereof." Id. at 20-21. Even though the trustee ex maleficio no longer has the funds, "the [ trustee de son tort] is personally liable for the value of the property of the cestui which he has had in his possession, for the [sic] has converted the trust property, and although the cestui may not be able to follow the specific property and impress a trust upon it, he is nevertheless entitled to a judgment against the wrongdoing trustee." Id. at 21. "[I]n actions for conversion, in order to give the injured party full indemnity, interest is allowed on the value of the property from the date of its conversion. Independence Flying Service, Inc. v. Ailshire , 409 S.W.2d 628, 632 (Mo. 1966) (quoting Carson v. Smith , 34 S.W. 855, 858 (Mo. 1896). See also Citizens Bank of Appleton City v. Schapeler , 869 S.W.2d 120, 130 (Mo.App.W.D. 1993). Inasmuch as this was not a claim based solely on a violation of the provisions of Chapter 110, but was for conversion, it was not error to include a judgment for interest. Point II is denied.
In its third point, Edward Jones contends that the trial court granted summary judgment on a theory different than that contained in the County's motion for summary judgment. It argues that the County's motion for summary judgment was based solely on a statutory theory of liability whereas the trial court granted the summary judgment on the basis of conversion.
As a general rule, conversion is any distinct act of dominion wrongfully exerted over one's property, in denial of his right or inconsistent with it. In re Estate of Boatright, 88 S.W.3d 500, 506 (Mo.App.S.D. 2002). It may be proved in one of the following three ways: "(1) by tortious taking; (2) by any use or appropriation to the use of the person in possession, indicating a claim of right in opposition to the rights of the owner, or (3) by a refusal to give up possession to the owner on demand." Id. (quoting Reason v. Payne , 793 S.W.2d 471, 474 (Mo.App.E.D. 1990)). In the instant case, the County pleaded that its funds were placed in an account with Edward Jones without the procedures of Section 110.130 et seq. being followed; that Edward Jones took possession of those funds as a trustee ex-maleficio, continued to hold the funds in that capacity and converted them to its own use; and that the County had demanded a return of its funds, the demand was refused, and it was damaged.
The County's motion for summary judgment, supported by attachments, included the following facts alleged to be uncontroverted: On June 19, 1996, an account was opened with Edward Jones in the name of "Christian County Building Fund"; on June 21, 1996, the name on the Account was changed to "CBF" and the address for the Account was changed; Edward Jones had not complied with Section 110.130 et seq. by submitting a bid to be a depositary of county funds; the authorized depositary of county funds was the Ozark Bank; $650,000.00 was deposited in the Account on June 21, 1996, by way of check drawn on the County's authorized account at the Ozark Bank; Edward Jones transferred funds from the account with it to accounts not owned by the County in early July 1996 and at that time, Edward Jones' agent knew that the funds belonged to the County; the funds were transferred without requiring a check in violation of Section 110.240; and, Edward Jones denied the County's demand for payment of damages. Edward Jones does not argue that there were genuine disputes about any of these allegations; only that under these facts, a claim for conversion could not be supported. In other words, we interpret Edward Jones' contention to be that under these facts, the County was not entitled to a judgment as a matter of law.
In its judgment sustaining the County's motion for summary judgment, the trial court found, inter alia, that the Ozark Bank was the authorized depositary for funds of the County; Edward Jones opened the Account in the name of the "Christian County Building Fund" without submitting a bid or proposal to be the County's depositary, and in addition, it is not a bank; $650,000.00 was deposited in the Account by a check drawn on the County's authorized account at the Ozark Bank; Edward Jones purported to transfer funds from the Account to an account in the name of Melton at another bank without requiring a check signed by the county treasurer; and that Edward Jones had refunded only $24,955 of the money deposited with it. It concluded that the opening of the Account at Edward Jones and the accepting of the funds was not authorized as provided for in Sections 110.130-.140 and was unlawful; Edward Jones violated Section 110.240 by paying out County money without requiring a check signed by the county treasurer; from the date of receipt the County funds were unlawfully retained and disposed of by Edward Jones; that at all times Edward Jones' right to the money was solely that of a trustee ex malifecio and it was at all times obligated to return those funds to the County but has not done so; and the balance that should have been refunded or returned to the County, after allowing just credits, was $368,837.28. It entered judgment for $368,837.28 with interest at the rate of 9 percent "from the date of conversion," for a total of $601,204.80.
Edward Jones' point relied on is exclusively that the summary judgment was based on conversion whereas the motion for summary judgment was based on a statutory theory of liability. We earlier determined that the fact that Edward Jones was not an authorized depositary of the County's funds pursuant to Sections 110.130, et seq. did not absolve it of liability. Rather, that fact established that its acceptance of those funds placed it in a position of trustee ex malifecio. As indicated, a trustee ex malifecio does not obtain title to the funds, but rather holds them in trust. Contrary to the apparent position of Edward Jones, its liability under the pleadings and in the motion for summary judgment was premised on the fact that it was a trustee ex malifecio because of its failure to qualify as a depositary of the County funds, and for conversion of those funds. It's liability was never based on a remedy found in Chapter 110. We do not agree with Edward Jones' point relied on; that the only viable theory in the motion for summary judgment was a statutory theory of liability and not conversion. Accordingly, the point relied on is not well taken.
Edward Jones also raises issues in the argument section of its brief concerning the viability of a conversion theory "[e]ven if the County properly plead and sought summary judgment on a conversion theory." The issue for decision on appeal is that framed in the point relied on. In re Marriage of Colley , 984 S.W.2d 163, 168 (Mo.App.S.D. 1998). Issues raised in the argument section of the brief outside the scope of the point relied on are not for our review. Rea v. Moore , 74 S.W.3d 795, 799 (Mo.App.S.D. 2002).
In its fourth and final point, Edward Jones contends that the summary judgment was erroneous in declaring that its claimed defenses of waiver and estoppel were inapplicable. It argues that its responses to the motion for summary judgment established material fact issues that "[the County] was aware that [Melton] had opened an account with Edward Jones and was attempting to deposit a $650,000 check into that account, and that the Commission was given the opportunity to stop payment on the check issued to Edward Jones." It concludes that "[t]herefore, [the County] was not entitled to judgment as a matter of law."
As with the other points in this appeal, the dispute appears to be over the legal effect of undisputed facts. There appears to be no dispute about the primary facts recited earlier in this opinion. Edward Jones does not cite us to any responses it made to the County's motion for summary judgment which would have demonstrated genuine issues of material facts, thereby entitling it to prevail on that motion. Rather, we perceive its position to be that given the facts, the County still was not entitled to a judgment as a matter of law. This is in keeping with the fact that the key to summary judgment is the undisputed right to judgments as a matter of law; not simply the absence of a fact question. ITT Commercial Fin. Corp. , 854 S.W.2d at 380.
Edward Jones, in its point relied on, says that the trial court erred in entering summary judgment against it on its defenses of waiver and estoppel. Waiver was pleaded by Edward Jones in its original answer to the County's petition, but was not pleaded in their amended answer. Estoppel was pleaded in its amended answer. Waiver and estoppel are different legal doctrines. Brown v. State Farm Mut. Auto. Ins. Co. , 776 S.W.2d 384, 387 (Mo. banc 1989). Failure to plead an affirmative defense results in a waiver of that defense. Vaughn v. Willard , 37 S.W.3d 413, 416 (Mo.App.S.D. 2001). In addition, we note that the parties treated estoppel as the only pleaded affirmative defense. The County, in its memorandum in support of its motion for summary judgment, alleged that estoppel was the only defense asserted by Edward Jones, and proceeded to explain why it was not viable. In its memorandum in opposition to the County's motion for summary judgment, Edward Jones responded to the County's memorandum without taking issue with the fact that estoppel was its only asserted defense. Accordingly, we review this point only as it relates to the affirmative defense of estoppel.
The body of Edward Jones' argument also contains an argument contending that the defense of laches is still outstanding in the case. Laches, however, is not mentioned in the point relied on. As indicated earlier, the only issues for decision on appeal are those framed by the point relied on.
Edward Jones' estoppel contention finds its genesis in evidence that the Ozark Bank notified Presiding Commissioner Nelson about the check made payable to Edward Jones that had been presented for payment, and that he communicated with another commissioner and the prosecuting attorney before instructing the Ozark Bank to honor it. The argument section of Edward Jones' brief, however, has no citations to the record on appeal in violation of Rule 84.04(i). We will nevertheless attempt to review the point.
Edward Jones argues that the County "knew of Melton's plan to deposit county funds into an Edward Jones account." This statement is without citation to the legal file and, to the extent it is intended to mean that the County knew of Melton's plan before he approached Edward Jones, it is without support in the record. It also argues that the County authorized the transfer, again without a citation to the record. This presumably refers to the fact that the two commissioners who were made aware of the check drawn on the Ozark Bank, did not demand that it not be honored. Edward Jones also argues that the funds were in the Account for two weeks during which no County official contacted it to warn that Melton "may be attempting to misappropriate [c]ounty funds or that the transfer was somehow invalid based on Missouri statutes." Edward Jones argues that had a County official stopped payment on the check, or if they had contacted Edward Jones raising concerns about Melton and/or the deposit, the loss would have been avoided.
The general rules concerning estoppel of a governmental body are stated in State ex rel. Southland Corp. v. City of Woodson Terrace , 599 S.W.2d 529, 531-32 (Mo.App.E.D. 1980), where the court said:
Estoppels are not favored by the law and will not be casually invoked. The doctrine of estoppel is not generally applicable against a governmental body. If it is applied, it is done so only in exceptional circumstances with great caution. It is a well-established principle in Missouri that a governmental unit is not estopped by illegal or unauthorized acts of its officers. . . ." The protection of the public and the declared public policy requires public officials to comply with mandatory statutory provisions, and such requirements may not be avoided by a compliance only when the official sees fit to comply. (internal citations omitted).
An estoppel must be based upon action taken upon reasonable reliance. B D Inv. Co., Inc. v. Schneider , 646 S.W.2d 759, 764 (Mo. banc 1983). In this regard, everyone dealing with public officers and funds is charged with knowledge of the statutory provisions designed to safeguard those funds. In re Cameron Trust Co. , 51 S.W.2d at 1026. "One dealing with a municipal or county government must take notice of the limitations on the power and authority of the representatives with whom he deals." McDonald Special Road Dist. vs. Pickett , 694 S.W.2d 273, 277 (Mo.App. S.D 1985). "The unauthorized acts of public officials are, and in law are known to be, unauthorized and consequently not binding on the principal, their mistakes being their own and not the mistakes of the sovereign." Id. (quoting Elkins-Swyers Office Equip. Co. v. Moniteau County , 209 S.W.2d 127, 131 (Mo. 1948).
Edward Jones' estoppel contention is based on the knowledge of "the County" that the check had been drawn, the failure to stop payment on the check, and the failure to contact it before the funds were transferred to Melton's personal accounts. Notwithstanding any issue about whether Presiding Commissioner Nelson, or even he and Commissioner Barnett, could have individually performed acts that would have estopped the County, Edward Jones' contention assumes, inter alia, that knowledge by some county officials that the check in issue had been presented for payment necessarily meant that they knew it was for some unlawful purpose. While, as indicated earlier, Edward Jones was not a properly selected county depositary to which Melton would have had authority to transfer funds for deposit, its financial services included selling U.S. Treasury Securities. In this regard, Section 110.270 authorizes a county to place funds not needed for current operations in obligations described in MO. CONST. art. IV, § 15, by purchasing them through federally insured institutions in the county, or if they are unwilling or unable to provide such obligations, then to purchase them from federally insured institutions in an adjacent county. It also provides that such purchases may be made "provided the county determines such purchases to be in the best interest of the county as determined by the county treasurer." There is nothing in the record before us to indicate that Presiding Commissioner Nelson or the other county officers referred to had any knowledge that the funds were being transferred to Edward Jones for an illegal purpose or by an illegal means as opposed to those described above which would have been statutorily authorized. Their actions or inactions could hardly be the basis of an estoppel against the County, especially considering the reluctance of the court's to apply that theory to a governmental entity.
Edward Jones relies on two cases in support of its estoppel theory. Cole County v. Central Missouri Trust Co. , 257 S.W.2d 774, 775 (Mo. 1924), was an action to recover interest claimed to be due from the defendant which was the county depositary. The issue was whether the county was entitled to interest computed on the daily balance of the deposit as required by statute, or annually. Id. The evidence indicated that the county court had actually selected the defendant as the county depositary for a part of its funds before bids were opened, and the award was not for an equal part of the county funds as indicated in the advertisement for bids. Id. The evidence also indicated that the county had $300,000 in bonds bearing 5 percent interest that it could not sell because of an irregularity in their authorization; the defendant offered to take all of the bonds provided the county would refund them at 4½ percent interest; and in order to avoid the payment of daily balances as required by statute the defendant agreed to pay 4½ percent, "which was far in excess of the rate then prevailing, provided the money on deposit would be represented by time certificates." Id. The county claimed that it was entitled to interest calculated on daily balances rather than the annual basis agreed upon by the defendant and an earlier county court. Id. at 776. In affirming a judgment for the defendant, the Supreme Court of Missouri noted that generally circumstances and facts which would estop an individual do not estop a county in its official capacity. Id. at 779. The court concluded, however, that "[t]he county having received the benefit of the illegal contract which it actually entered into — a benefit far in excess of any it would have received by a proceeding according to the statute — and having retained that benefit, the arrangement having been acted upon in good faith by both parties and completely performed by the defendant to is own detriment, the county its estopped to deny the arrangement." Id. at 779.
Contrary to the Cole County case, here the County received no appreciable benefit from the actions of Melton or Edward Jones. The arrangement with Edward Jones was not entered into by the full county commission, but rather by Melton for what obviously was for his personal gain.
Edward Jones also relies on In re N. Mo. Trust Co. of Mexico, Mo. , 39 S.W. 415 2d (Mo.App. St. L. 1931). In that case, the issue was preference of a claim in connection with the liquidation of the North Missouri Trust Company. Id. at 416. School money had been deposited by a consolidated school district of Audrain County in the North Missouri Trust Company with no advertisement for bids. Id. The appellate court described the issue as follows:
The controversy is narrowed down to the question, therefore, of whether the steps taken by the district towards the designation of the North Missouri Trust Company as a depositary were in so far a noncompliance with the statutory requirements as to render that institution a [ trustee ex maleficio], and consequently to impress the funds deposited in it with a trust. While the question is by no means unattended with difficulties, we think the facts and circumstances of the case require the answer to be given in the negative.
Id. at 417. The court noted that there was a lack of literal compliance with the statutory requirements for selecting a depositary, but that the funds were ordered deposited by the school board at its regular meeting, interest was agreed to be paid, and a security bond was given. Id. at 418. "In other words, the trust company was at least a de facto depositary." Id. It concluded that "in view of all the circumstances of the case . . ., the district, by its long course of dealing, accepted and acquiesced in the trust company as its depositary, and hence should now be estopped to deny the existence of contractual relations empowering the trust company to serve in that capacity." Id. 418. In doing so, the court noted:
A contract was entered into in good faith between the district and the trust company; a bond was given which does not affirmatively appear to have failed to satisfy the statutory requirements; the contract was performed by the bank to its detriment, at least in so far as it became obligated for the payment of interest; the district accepted whatever benefits were to be derived from the contract; and not one cent of the sums actually deposited has been lost by the district in view of the discharge by the bonding company of its obligation under the bond.
Id.
There are several reasons North Missouri Trust Co. does not control this dispute. First, the contract here was not entered into in good faith between the County and Edward Jones (at least from the County's side of the arrangement); no bond was given; and the County did in fact lose considerable funds as a result. Additionally, the Supreme Court of Missouri (after North Missouri Trust Co. and after Cole County ) decided In re Cameron Trust Co. in which, as indicated earlier, the issue was the effect of a deposit of public funds in a trust company without following the statutory requirements to designate it as the official depositary. 51 S.W.2d 1026. In the course of holding that the trust company was a trustee ex maleficio of the funds, the In re Cameron Trust Co. court discussed North Missouri Trust Co. and held that whatever might be said of the holding in that case, it disapproved the holding that any legal contract can be entered into by a school board in the designation of a depositary for school funds unless the provisions of the statute are complied with. Id. It concluded that "the school district had no authority, whatever, by acquiescence, common consent, or by an express contract," to enter into the contract at issue. Id.
The subsequent case of Donovan v. Kansas City , 175 S.W.2d 874 (Mo. banc 1943), is also instructive. There, the plaintiff sued Kansas City for the value of foods delivered to the city's hospitals and penal institutions based on instructions conveyed by telephone in violation of a statute requiring contracts to be in writing and signed by the parties. Id. at 876. The Supreme Court of Missouri held that a contract that was beyond the powers conferred by the legislature is "wholly void, and of no legal effect." Id. at 879. It also quoted, with approval, the following from 31 C.J.S., Estoppel, § 143:
The doctrine of ultra vires is applied with greater strictness to public than to private corporations, and as a rule, a municipality * * * is not estopped by an act or contract which is beyond the scope of its corporate powers, especially where the party claiming the estoppel was aware of the municipal incapacity. * * * An estoppel to deny the validity of the act of a governmental body may not be based on the very act to which the incapacity relates. The doctrine of estoppel may not be applied against a municipal corporation * * * where the subject matter of the act or contract is illegal or malum prohibitum; nor * * * under a contract which is void. A municipality may not be estopped by acts or contracts which violate mandatory constitutional or statutory provisions.
Id. at 881.
For the above reasons, we hold that Edward Jones has not demonstrated that, based on the County's motion for summary judgment and its response thereto, that the County would not be entitled to a judgment as a matter of law because of Edward Jones' theory of estoppel. Accordingly, this point is denied.
The judgment of the trial court is affirmed.
Prewitt, J., and Rahmeyer, J., — concur.