The VALLEY NATIONAL BANK OF PHOENIX, a national banking association, Appellant,
The FIRST NATIONAL BANK OF HOLBROOK, a national banking association, Appellee.
[83 Ariz. 288] Rawlins, Davis, Christy, Kleinman & Burrus, Phoenix, for appellant.
Axline & Shelley, Holbrook, for appellee.
[83 Ariz. 289] JOHNSON, Justice.
This is an appeal from a judgment entered in a declaratory judgment action holding Chapter 119 of the Laws of 1956, providing for the deposit of public monies, is void and unconstitutional, and permanently enjoining and restraining the members of the board of supervisors and the treasurer of Navajo County from acting under or pursuant to said law.
The First National Bank of Holbrook, hereinafter called appellee, filed suit seeking a declaratory judgment against Navajo County, the members of the board of supervisors and the county treasurer, declaring Chapter 119 of the Laws of 1956 void and unconstitutional. The Valley National Bank of Phoenix, hereinafter called appellant, was permitted to intervene upon the ground it had an interest which would be affected by the judgment and at the same time filed an answer admitting there was a justiciable controversy. Thereafter, it amended its answer denying a justiciable controversy existed and moved to dismiss the complaint upon the grounds that the
complaint failed to state a claim upon which relief could be granted and for failure to join as defendants indispensable parties to the action, to-wit, the State of Arizona, the state treasurer, the attorney general and the board of deposit of the State of Arizona, as defined by A.R.S. § 35-321. The trial court denied the motion to dismiss and entered judgment in favor of appellee, holding the act unconstitutional.
In order to have a complete understanding of the issues involved it is necessary to set forth a brief analysis of Chapter 119, now found in section 35-321 et seq., A.R.S.
Chapter 119, supra, deals with the deposit of public monies of the State of Arizona, counties and municipalities. The statute amended section 10-302 of the 1939 Code. Under the 1939 Code the specified custodians of public money were given authority to deposit the same in banks which had qualified as public depositories by securing deposits of public money with securities as provided by section 10-303 of the 1939 Code. That law permitted the authorized officers to designate active and inactive depositories, but no interest was paid on such deposits by any depository. The amount to be deposited in any depository was entirely within the discretion of the various designated officials.
Chapter 119, supra, retained the basic requirements that depositories must secure the deposit of public monies with the same identical securities as under the previous law, but sought to accomplish two major changes in the method of handling public monies. The principal objective was to obtain the payment of interest on portions of the public funds and this was done by providing that the authorities charged with handling the funds classify same into active[83 Ariz. 290] and inactive deposits, to the end that the inactive deposits would contain monies not currently needed for operations of the state or political subdivisions, and that those inactive funds could be treated much the same as savings accounts, and would draw interest from the various depositories.
The second major change was to eliminate the discretion of the public officials in placing the public funds in various banks, and to provide a mathematical formula by which the money should be allocated among all of the banks qualifying as public depositories.
The statute designates a board of deposit of state funds, a board of deposit in each county for county funds, and a board of deposit in each city or town for these funds. The state board of deposit consists of the state treasurer, the governor and the state auditor, and the board of supervisors and the board of trustees or the common council are designated as the board of deposit for the county or city funds. Any national bank with its principal place of business in Arizona, and any commercial bank or savings bank carrying federal deposit insurance, is eligible as a public depository, except that savings banks may not become a depository for active deposits. The branch offices of parent banks are on an equal basis with eligible banks in a county having no branches.
The law provides that the board of deposit shall designate the public monies which shall be available for deposit as active deposits and as inactive deposits, and notify all banks eligible to receive such funds, and such banks are required to apply for such active and inactive funds as they desire to carry, with a statement certifying to amount of qualifying deposits; thereafter, awards are made by the board of deposit.
With regard to state money, if the applications for inactive funds shall exceed the total available for deposit, then the board of deposit shall first allocate one million dollars to each eligible depository, and the balance of inactive funds shall thereupon be allocated among the eligible depositories in the proportions that the capital structure of each bears to the aggregate capital structure of all. The active funds of state monies are all apportioned on the basis of the capital structure of the respective banks.
All banks within the state are eligible to qualify as depositories for state funds; all banks within a county are eligible to qualify as depositories of funds in that county; and all banks within a town or municipality are eligible to qualify as depositories of funds of such town or municipality.
Where the applications for county or city founds exceed the total inactive or active funds, an apportionment is then made among the eligible depositories in the proportion that the deposits of each bears to the total deposits of all.
[83 Ariz. 291] The statute further provides that inactive public deposits shall be evidenced by certificates of deposit having a maturity of six months from the date of issue. The statute does not provide for the payment of interest at a fixed per cent per annum on inactive funds. However, the statute has adopted a formula which provides that the basic calculation of interest on such deposits shall be the highest permissible rate of interest, to be established by the board of deposit, but shall not exceed fifty per cent of the average yield before taxes of United States treasury bills for the three months next preceding the issue or renewal of a certificate of deposit. The interest is payable on maturity of the certificate of deposit, and the ...