USA > Wisconsin > An illustrated history of Wisconsin from prehistoric to present periods : the story of the state interspersed with realistic and romantic events > Part 57
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"But it is objected that the state cannot recover this interest because it must trace its title to it, if at all, through a series of unlawful transactions. If it is established that the principal fund which earned the interest was the property of the state, this objection does not seem to be insuperable. The depositing of the money in banks by the treasurer for his own gain was forbidden and unlaw- ful. On its civil side at least the unlawful act was a tort-a conversion of the state's money. The conversion did not displace the state's title. The fund was still the state's money. The accessory followed its principal ; the accretion was the state's money. United States v's. Mosby, 133 U. S., 276-286. But the treasurer can trace title to the interest only through his own wrongful act. This he cannot be allowed to do. That would be a violation of that most an- cient and widely applied maxim of the law, 'No man shall profit by his own wrong.' The defendant has not even plausible claim of legal title to this in- terest. It would, indeed, be a startling legal paradox if the treasurer, being forbidden by law to deposit the public funds for his own gain, could yet do the very thing forbidden, and get away with his gains according to law. This in- terest was also received into the state treasury. It was paid to the treasurer without restriction. There was no way for the banks to pay the money into the treasury but to put it into the hands of the treasurer. Any subtle distinc- tion between paying to the treasurer and paying into the treasury is specious and illusive. It is not certain that any of this money came into the vaults of the treasury. It is paid to the treasurer. It is then, in legal contemplation, in the treasury. People vs. Mckinney, 10 Mich., 54. It is then the treas- urer's duty to put it into the vaults. Whether he do so does not affect the owner- ship of the money. It is the treasurer's duty to deliver to his successor in office all moneys, books, records, papers, furniture and other effects belonging to or preserved in his office. Section 157, Subdivision 6. These interest moneys belong to his office. He has not faithfully discharged the duties of his office until he has delivered them to his successor in office.
"It is not considered that a long-continued practice of state treasurers to deposit public money in banks for their own gain is such a practical construc-
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WISCONSIN'S STATE GOVERNORS.
tion of the statute by officers charged with the execution of the law as to be of any controlling influence. It is only in case of real doubt that construction is allowable. Whether the law contemplated that the treasurer might deposit public moneys in banks for his own gain is not perceived to have been doubtful since Chapter 340, Laws of 1876, came in force, however it may have been before. Nor is it considered that the delay of the state to claim this money acts in any way as a bar to its right or a cloud upon its good faith. The law is the standard of the treasurer's duty, and the measure of his right. It all the while warned him that this was not his money.
"Judgment should be for the state for the amount of moneys detained by the treasurers, with interest from the time when it should have been paid to their successors."
Judgment was accordingly entered for the state against all the defendants for $44,217.83, and interest thereon from the first Monday in January, 1887, being $ 15,906.14, making a total of $60, 123.97, and for costs.
The defendants, and each of them, joined in an appeal to the supreme court from the judgment.
" Joshua Stark, attorney, and David S. Ordway, of counsel for the appel- lants, contended, inter alia, that the finding of the trial court, that the defend- ant McFetridge loaned public moneys to banks was not warranted. The de- posits were not loans. There is a well recognized distinction between a general deposit in the bank subject to check and a loan. Lewin Trusts, 295; Estate of Law, 14 L. R. A., 103, and cases cited in opinion and note; People ex rel. Nash vs. Faulkner, 107 N. Y., 489; Barney vs. Saunders, 16 How., 545-6; Payne vs. Gardner, 29 N. Y., 167. The payments of money to defendant McFetridge, by reason or on account of such deposits, were gratuitous and voluntary, and were made to him individually and for his own personal use, and not to him officially for the use of the state. At no time could an action have been maintained by him for the recovery of interest, so-called, or other compensation from the banks : (1) For want of a contract in that behalf ; and, (2) because any contract for the payment of interest to him individually, or to him as state treasurer, would have been illegal, contrary to public policy, and therefore void. Ring vs. Devlin, 68 Wis., 384-89. No action could have been maintained by the state against the banks for the recovery of interest upon such deposits : (1) For want of any agreement in that behalf between the banks and the state ; (2) because any such agreement, if it had been made by the treasurer on behalf of the state, would have been a violation of law and therefore void, and the state, in order to maintain an action upon it, must ratify it, and this could only be done by legislative act. State vs. Keim, 8 Neb., 63; State vs. Delafield, 8 Paige, 527-542 ; State vs. Buttles, 3 Ohio St., 309. It is equally clear that this action against the treasurer to recover moneys
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HISTORY OF WISCONSIN.
' obtained as the fruit of a criminal violation of law cannot be maintained without ratification of this unlawful act. The only remedy of the state, if any, against the banks without such ratification would be, not upon contract, but by bill in equity to reach the funds converted by deposit, and damages for their conversion. First Nat. Bank vs. Gandy, II Neb., 431; Union Stock Yards Bank vs. Gillespie, 137 U. S., 411 ; Perley vs. Muskegon Co., 32 Mich., 132. Such right of action ceased when the entire amount of the funds deposited was duly applied by the treasurer to the public use, or turned over to his successor in office. State vs. Mills, 55 Wis., 229; State vs. Baetz, 44 id., 624.
" The ' moneys belonging to the treasurer's office,' referred to in the bond, are those moneys only which the treasurer was by statute required to receive and have in charge and pay out according to law. They did not include the moneys voluntarily paid by the banks to the treasurer individually. The liability of a surety is restricted to the express terms and the necessary import of his undertaking.
" David S. Ordway, as attorney for the sureties, also contended, inter alia, that there was no law or statute, at the date of the bond upon which this suit is brought, requiring, or even by implication authorizing, the loan or de- posit by the treasurer of public funds, or the receipt by him of interest or gratuity for the use of such moneys. Without such statute it was not, and could not be, an official duty resting upon the treasurer to accumulate or pay into the treasury either interest or compensation for such use of the public funds. It follows that the sureties cannot be held liable in this action, because it is only the official acts of the treasurer which the sureties have by their con- tract become responsible for."
The attorney-general and R. M. Bashford appeared for the respondent, together with William F. Vilas, of counsel.
Chief-Justice Lyon, in rendering his opinion in this most noted case, after making a general statement of its status, among other things, said: “ It is assumed for the purposes of the case that, if the legal title to the public funds which lawfully came to the hands of Treasurer McFetridge was vested in him, there can be no recovery by the state, either against him or the sureties in his official bond, for any profit he may have made by the use of such funds. The question is whether the state is the owner of the public funds in the hands of its treasurer, or whether the legal title thereto is in the treasurer, must be deter- mined by the statutes prescribing the rights, duties and liabilities of the treasurer. These statutes will be referred to and considered as briefly as possible.
" Sec. 152, R. S., is as follows: 'The treasurer shall keep his office at the capitol, shall receive and have charge of all money paid into the state treasury, and shall pay out the same as directed by law.' Sec. 153 requires
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WISCONSIN'S STATE GOVERNORS.
him to give a bond, with sureties, conditioned (among other things) for the faithful discharge of the duties of his office, and that he shall deliver to his successor in office, or other person authorized to receive the same, all moneys, property, etc., 'belonging to his said office.' Sec. 154 requires the governor to exact an additional bond of the treasurer in several contingencies, one of which is ' whenever the funds in the treasury shall exceed the amount of the treasurer's bond.' Sec. 157, Subd. I, makes it the duty of the treasurer to keep a cash book, and to enter therein 'a detailed account of all money received by him and disbursed,' which book he is required to deposit weekly with the secretary of state. Subd. 2 makes it the duty of the treasurer ' to pay out of the state treasury ' on demand, the amounts specified in proper warrants drawn by the secretary of state, and provides that ' he shall pay no money out of the treas- sury ' except in pursuance of some law authorizing him to do so. Subd. 7 requires him to report quarter-yearly to the governor ' the total amount of the funds in the treasury, specifying in what kinds of currency they consist, and the amount of each kind,' etc. Subd. 8 requires him also to report to the governor, at stated times, ' a full and detailed statement of all moneys received into and paid out of the treasury' during the times specified in the statute. Sec. 159 is as follows: 'The governor and attorney-general shall, at least once in each quarter year, and at such other times as the governor may elect, exam- ine and see that all the money appearing by the books of the secretary of state and state treasurer as belonging to the several funds is in the vaults of the treasury, and in case of a deficiency shall require the treasurer to make up such deficiency immediately ; and if such treasurer shall refuse or neglect for ten days thereafter to have the full sum belonging to said funds in the treasury the attorney-general shall institute proceedings to recover the same.' Sec. 4419, the provisions of which doubtless extend to and include the state treasurer, makes it prima facie evidence of the embezzlement thereof if the treasurer loans or deposits the public funds in his hands ' for his own gain, profit or advantage, without special authority.' This section also contains the following provision : ' Every public officer shall promptly pay over, as required by law, the same moneys received and held by him by virtue of his office, and the whole thereof.'
" The above statutes were all in force when, and for a long time before, the bond in suit was executed. From beginning to end they were entirely inconsistent with the theory that the legislature intended by the enactment of any of them to vest the state treasurer with the legal ownership of the public moneys which come to his hands, thus making him merely the debtor of the state in respect thereto. If such were his relation to the state, it would be difficult to show that such funds were not subject to be seized for his debts, or, in case of the death of the treasurer in office, that the same would not go to
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HISTORY OF WISCONSIN.
his administrator as part and parcel of his estate, the state being, perhaps, a preferred creditor. It is inconceivable that any legislature could intend such results, and there is nothing in any statute that forces the conclusion that they did so. A close analysis of the above statutes, or any extended discussion of them, is quite unnecessary, for a perusal of them is sufficient to carry convic- tion to the mind that the legislature never intended to divest the state of its title to the public funds in the hands of its treasurer, and the consequent con- trol over those funds which results from ownership thereof. We must there- fore negative the first proposition above stated, and hold that the state was the owner of the public funds which came to the hands of Treasurer McFetridge. Some of the above statutes are hereinafter referred to on another branch of the case, and a construction given them ; but such construction does not diminish their persuasive force as showing that the state is the owner of such funds.
" Having determined that the fund thus deposited in banks by Treasurer McFetridge belonged to the state, we assume the accuracy of the rule held by the cases in the second class above mentioned, and under the rule of the cases in the fourth class, which we approve, we hold Treasurer McFetridge and his sureties liable in this action for the interest in question.
" Upon due consideration our conclusions upon the whole case are (and the court so holds) that the funds which Treasurer McFetridge deposited with banks were the property of the state; that in making such deposits as treasurer and stipulating for and receiving interest thereon, or receiving interest thereon without such stipulation, he did not violate any law of the state; that such interest so paid to him, being an accretion or increment to the fund, increasing it by the amount of interest thus paid thereon, belongs to the state; that Treasurer McFetridge received such interest by virtue of his office of state treasurer, and the same belonged to his said office; that his failure to account therefor to the state, or to deliver the same to his successor in office, as re- quired by law, is a breach of the conditions of his official bond, and that this action can be maintained on such bond, against him and his sureties therein, to recover the interest thus received by him and unaccounted for.
" In determining this case the court has adopted many of the views of the learned circuit judge, but withholds its approval of others. Inasmuch as we arrive at the same conclusion reached by him, although by different proc- esses of reasoning, it is unnecessary further to discuss the propositions in his very able opinion which we are not prepared to adopt."
THE SECOND TREASURY CASE.
The next treasury case argued in the supreme court was the State vs. Har- shaw, appellant, and State, respondent vs. Sawyer et al., appellants. In this case Charles W. Felker and J. V. Quarles appeared for the appellants, and the
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WISCONSIN'S STATE GOVERNORS.
attorney-general and R. M. Bashford, with William F. Vilas of counsel, ap- peared for the state. The opinion of Chief-Justice Lyon, which was filed January 10, 1893, is as follows :
" There are two appeals in this action-one by the defendant, Henry B. Harshaw, and the other by all the remaining defendants. Such appeals are from the judgment of the circuit court, in favor of the state and against all the defendants.
" The defendant Harshaw was treasurer for the term commencing on the first Monday in January, 1891. The defendants, Sawyer, Hay, McMillen, Porter and Hooper, together with Charles B. Clark, now deceased, are the sureties in his official bond as such treasurer. The action is to recover interest paid by banks on deposits therein of the public funds made by Treasurer Har- shaw, in his name of office. It is like the case of State vs. McFetridge, ante, P. 473, except that, instead of receiving the interest on such deposits himself, Treasurer Harshaw and his sureties, or some of them, secured the services of the defendant, Schreiber, to collect and receive it. Schreiber received over $62,000 of such interest, and deposited the same in the defendant, The National Bank of Oshkosh, of which he was cashier, in the name of the defendant S. M. Hay, trustee. Hay is a surety in such bond, and the president of the de- fendant bank. The money still remains there on deposit. The action is in equity, for an accounting of such interest, and to reach such deposit in the de- fendant bank.
" The court held the defendant Harshaw and his sureties liable for the amount of such interest, with interest thereon from the close of his official term, with costs. It also held defendant Schreiber and the bank liable for the amount thus deposited, but not for interest thereon or costs. Judgment was entered for the state, accordingly, which provided that, when the amount of such de- posit should be paid, the same should be applied upon the judgment against Treasurer Harshaw and his sureties.
" In respect to the liability of the defendants, Harshaw and his sureties, the case is ruled by the McFetridge case. There can be no doubt that the state is entitled to recover the interest realized on its funds, and deposited in the de- fendant bank by Schreiber.
" By the Court .- The judgment of the circuit court is affirmed on both appeals."
Justice Pinney did not sit in either of the treasury cases, as he had acted as counsel for McFetridge et al., in the original action tried before Judge Newman.
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HISTORY OF WISCONSIN.
.
TABLE OF JUDGMENTS ENTERED VS. STATE TREASURERS AND PAYMENTS THEREON.
No.
Name.
Judgment For
Amount Paid.
Date of Judgment.
I
McFetridge,
$75,119.49
$72,419.64
April 27, 1893. April 27, 1893.
2
McFetridge,
43,292.31
15,000.00
3
McFetridge,
60,412.66
65,267.42
February 23, 1892.
I
Harshaw,
64,437.79
67,616.48
January 24, 1893.
2
Harshaw,
68,078.99
73,082.41
February 23, 1892.
I
Guenther,
60,211.55
50,000.00
June 28, 1893.
2
Guenther,
71,015.72
30,000.00
June 28, 1893.
$442,568.42 $373,385.95
The actions brought against Richard Guenther, one of the ex-treasurers, was not appealed to the supreme court. The balance of the judgments will be paid during the first half of the year of 1894.
THE GREAT FINANCIAL DEPRESSION.
It is the history of every civilized country, that at least once in every twenty years a financial crisis or a pronounced monetary stringency exists, arising usually from a multiplicity of causes. In the year 1873, the great finan- cial depression, which swept away so many large business houses and manu- facturing concerns throughout the United States and Canada, extended over a period of two years.
On April 1, 1893, the people throughout the whole country, were pros- perous and happy ; not a cloud was visible in the horizon to warn the people of the terrible financial calamity which was so soon to befall them. During the latter part of April, numerous small depositors drew their savings from various banks, and, later on, larger depositors did the same, until, throughout the union, there was a quiet run upon all of the banks, and, in some instances, ' panics were created, which caused a general run upon some designated bank, eventually causing its suspension.
The beautiful and thriving city of Milwaukee was one of the first cities in the west to suffer irreparable loss from bank failures. On May 13, 1893, the depositors made a general run upon the Plankinton bank, such as never before was known in the history of that city. Thousands of depositors be- sieged the bank for more than two days. The Plankinton block, on Grand avenue, at times resembled a hive of bees during swarming season. The bank officials took precautionary measures, and reinforced the bank's reserves with about $80,000 in gold, which they brought from Chicago, thus tiding over the great run, and avoiding immediate suspension. Each depositor who presented checks, drafts or certificates, were immediately paid. Notwithstanding the tiding over of its temporary embarrassment, the great banking house soon failed, on account of its previous bad management.
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WISCONSIN'S STATE GOVERNORS.
Following closely upon this great and disastrous failure, came the suspen- sion of the Commercial bank, the Milwaukee Fire and Marine Insurance bank, familiarly known as the "Mitchell bank," the South Side Savings bank, and the Milwaukee National bank.
The failure of these banks was precipitated by the withdrawal of deposits, yet the direct and fundamental cause of each failure, or suspension, was the ex- tremely bad management of the respective banking concerns, and in some in- stances, by the fraudulent and criminal management of the bank's finances by its officials.
From April 20th, to October Ist, more than one hundred and fifty na- tional banks throughout the United States had, besides numerous private con- cerns, suspended, thus entailing upon the depositors the loss of millions of dollars, and almost paralyzing the entire financial and commercial interests of a great nation.
The general impeding of so large a number of our manufactories and other industries, caused by this great financial stringency, occasioned, during the early winter of 1893, much distress, especially among those who depended up- on their daily labor to support themselves and families. So great was the suf- fering for the necessities of life in the iron regions of northern Wisconsin that Governor Peck, in November, issued a proclamation, calling upon the gener- osity of the people throughout the state to contribute to the needy and desti- tute.
The governor and his staff visited that portion of the state, where so many miners were in a semi-starving condition, investigated and ascertained the true condition of affairs, and appointed relief committees for the distribution of the numerous carloads of clothing and provisions promptly sent by the people of the state, who liberally responded to the governor's call for aid. The railroad companies were not behindhand in generosity, as they carried carloads of goods, provisions, etc., free of charge.
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FLEMING
FRONTENAC ON LAKE PEPIN, MISSISSIPPI RIVER.
CHAPTER LXIII.
HISTORY OF WISCONSIN RAILROADS.
THE CHICAGO AND NORTH-WESTERN RAILWAY COMPANY.
PRIOR to the Black Hawk war, the territory now constituting the state of Wisconsin was sparsely settled, there being only a few mining camps in the southwestern part, and a few military posts, the former the outgrowth of settle- ments made by the early Jesuits. The Indian title to the southern portion of the territory having been extinguished by the treaty of 1833, the advance guards of the early pioneers arrived in 1835, and settled where Kenosha, Ra- cine, Milwaukee and Sheboygan now are. The next year, 1836, the regular settlement of the country commenced, and, it is truthfully said, that no part of the United States was ever settled more rapidly, after its commencement. In these days, railroads were in their infancy, even in the eastern states.
Eastern Wisconsin was easily reached by Lake Michigan, while the rich and fertile prairies and the valuable timber in the central and western portions of the territory were so inaccessible, that it was at first suggested that part of this territory could be reached by canal. Consequently, a valuable land grant was given by congress, for the purpose of constructing the Milwaukee and Rock river canal, with the view of uniting Lake Michigan with the Rock river. On January 5, 1838, the house of representatives passed an act incorporat- ing the Milwaukee and Rock river canal. The company constructed a dam across the Milwaukee river, which was within the present city limits, and also constructed about two miles of the canal, then the scheme was abandoned. Upon the abandonment of the water communication, the attention of the community was turned to the construction of the railroads, as the most feasi- ble means of communicating with the commercial world. No general rail- road law was enacted, either by the territory or state, prior to 1872. Up to this time, all companies organized for the construction of railroads were incor- porated by special charter.
One of the most extensive and best equipped railroad organizations in the northwest is the Chicago and North-Western Railway Company, which has its origin as follows :
The territorial legislature, in 1848, granted a charter to the Madison and Beloit Railroad Company, with authority to construct a road from Beloit to Madison. In 1850, the state legislature granted authority to the company to extend the road to the Wisconsin river and LaCrosse, and to a point on the Mississippi river, thence to St. Paul, and also from Janesville to Fond du Lac. Under the authority of the legislature its name was changed to the Rock
571
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HISTORY OF WISCONSIN.
River Valley Union Railroad Company. In 1851, the line from Janesville, northward, not being pushed to the satisfaction of the people, its representatives secured from the legislature a charter to the Illinois and Wisconsin Railroad Company, with authority to consolidate with any railroad in Wisconsin. The Wisconsin legislature, in 1855, authorized the consolidation of the Illinois and Wisconsin Company with the Rock River Valley Union Railroad Company. The new organization was now called the Chicago, St. Paul and Fond du Lac Railroad Company.
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