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AGO 1956 No. 193 - January 30, 1956
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Don Eastvold | 1953-1956 | Attorney General of Washington

RIGHT OF COUNTY TO INVEST "INACTIVE AND EXCESS" FUNDS IN U.S. -- LIABILITY OF COUNTY COMMISSIONERS IN THE EVENT OF LOSS OF GOVERNMENT BONDS

1. Counties may invest "inactive and excess funds in U. S. Government bonds.

2. County Commissioners, county finance committees, and county treasurers are not personally liable in the event of loss through investment of inactive and excess funds in U. S. Government bonds if they have followed procedure set forth in RCW 36.33.180.

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                                                                 January 30, 1956

Honorable Cliff Yelle
State Auditor
Legislative Building
Olympia, Washington
Attention:  !ttA. E. Hankins, Chief Examiner

            Division of Municipal Corporations                                                                                                             Cite as:  AGO 55-57 No. 193

Dear Sir:

            In your letter of December 16, 1955, you have requested our opinion as to whether or not (1) RCW 36.33.180 is broad enough to enable a county to invest surplus funds in any type of government bonds, and (2) if the county commissioners would be held personally liable for loss in a forced sale, should the money tied up in government bonds be needed for current county purposes.

            Our answer to question No. 1 is in the affirmative, and to question No. 2 in the negative.

             [[Orig. Op. Page 2]]

                                                                     ANALYSIS

            RCW 36.33.180 provides as follows:

            "The county treasurer of every county shall call the attention of the county finance committee to any inactive fund or funds in excess of the current needs of the county.  The committee may by order authorize him to invest such inactive or excess funds in bonds of the United States government, if prior to making the order, they have applied for and received from the state finance committee, its approval of such investment."

            On its face it would appear that the legislature has authorized the investment of "inactive fund or funds in excess of the current needs of the county" in United States government bonds.  There is no qualification as to what type of government bonds shall be considered as proper investment of such funds.  The only qualification is that such funds are either inactive or in excess of current county needs.

            We hereby specifically affirm the opinion of the attorney general issued on May 14, 1948 [[to Patrick M. Steele, Prosecuting Attorney, Pierce County]], in which he ruled that funds existing in the Current Expense Fund are not excess or surplus funds because of the specific wording of the act creating the fund and because of the decision of the supreme court of the State of Washington in the case ofWeyerhaueser Timber Company v. O. W. Roessler, 2 Wn. (2d) 304.

            It is our present opinion that each county fund must be examined to determine whether or not the legislature has provided restrictions on the use of the money so as to negative the possibility of a finding that the moneys in such funds could either be "inactive" or "excess."  In the absence of specific example it is, of course, impossible for this office to pass on more than the principle herein involved.

            With regard to question No. 2, we advise that municipal corporations and their officers have and may exercise only such powers as have been granted to them by the legislature.  This principle of law is too well known and accepted to require authority in the absence of constitutional question.  It is  [[Orig. Op. Page 3]] also well recognized that said corporations and officers may, and it is their duty to so do, exercise powers granted them by the legislative body of this state.

            Your attention is directed to the fact that the language used in the statute herein considered makes it mandatory for the county treasurer to call the attention of the county finance committee to the existence of inactive and/or excess funds.  If said committee acting within the terms of said statute does invest funds in United States bonds as authorized, certainly that board could not be held personally responsible for losses resulting in the sale of said bonds for less than the purchase price, when they had no say in the authorization of such investment.

            It would appear that in the case of Grays Harbor Construction Co. v. Paulk, 179 Wash. 300, our court has held that under amendment 12 to the state constitution, county officers are to be held strictly accountable for funds coming into their hands and that the exercise of ordinary care will not excuse the treasurer or his bondsman for loss of funds deposited in a bank which later become insolvent.

            In the case ofKittitas County v. Travers, 16 Wash. 528, the court further held that such deposits made with the "knowledge, consent and approval" of the county commissioners would not relieve the treasurer of liability in case the depositary failed.

            The situation under RCW 36.33.180, however, is much different.  This section deals with investments, not deposits.  In the case of deposits the title to the funds deposited and the right to their possession pass to the bank.  In the case of investment in government bonds the title to the bonds and their possession is in the county.  In the case of deposit the act is the direct act of the treasurer and within his sole control.  In the instant case the treasurer is required to inform the committee and the committeemay, if it so desires, "authorize" him to make such investment (subject to the approval of the state finance committee).

            In our opinion, the strict accountability rule enunciated in the two cases heretofore cited does not apply since those cases involved deposits and this case involved an investment specifically authorized by law.  We, therefore, conclude that neither the treasurer nor the members of the county or state finance  [[Orig. Op. Page 4]] committees would be liable for losses occasioned by a sale of the bonds below their purchase price, when such sales are made in accordance with RCW 36.33.190.

            We hope this may be of service to you.

Very truly yours,

DON EASTVOLD
Attorney General


B. F. RENO, JR.
Assistant Attorney General

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