Fidelity & Deposit Co. of Maryland v. Howard

• Decision Date: 07 December 1933
• Docket Number: No. 7104.,7104.
• Citation: 67 F.2d 961
• Parties: FIDELITY & DEPOSIT CO. OF MARYLAND v. HOWARD.
• Court: U.S. Court of Appeals — Fifth Circuit

67 F.2d 961 (1933)

FIDELITY & DEPOSIT CO. OF MARYLAND v. HOWARD.

No. 7104.

Circuit Court of Appeals, Fifth Circuit.

December 7, 1933.

M. F. Goldstein, of Atlanta, Ga., for appellant.

Samuel H. Wiley, of Sparta, Ga., and Wallace Miller and Jas. A. Lowrey, Jr., both of Macon, Ga., for appellee.

Before BRYAN, FOSTER, and SIBLEY, Circuit Judges.

SIBLEY, Circuit Judge.

This appeal seeks to assert the validity of the Georgia statutory lien for deposits of state funds against the property of an insolvent national bank which was a state depository. By a statute passed in 1876, now section 218 of the Civil Code of Georgia, it is provided as to the state treasurer's bond: "And all the property of the treasurer to the full amount of said bond, and the property of the securities to the amount for which they may be severally bound, shall be liable for the faithful performance by the treasurer of the duties of his office, from the date of the execution of said bond; and a lien is hereby created in favor of the State upon the property of the treasurer to the amount of said bond, and upon the property of the securities upon his said bond to the amount for which they may be severally liable, from the date of the execution thereof." In 1879 another act was passed, found in section 1249 et seq. of the Civil Code 1910, as amended, providing that the Governor might appoint solvent banks of good standing and credit to be depositories for state funds for terms of four years without salary, and by section 1252 said depositories shall before entering on the discharge of their duties by their proper officers execute a bond with good and sufficient sureties to be fixed and approved by the Governor, "Said bond shall be conditioned for the faithful performance of all such duties as shall be required of them by the General Assembly or the laws of this State, and for a faithful account of the money or effects that may come into their hands during their continuance in office. Said bond shall be filed and recorded in the executive office * * * and said bonds shall have the same binding * * * effect as the bond required by law to be given by State treasurers, and, in case of default, shall be enforced in like manner." The words last quoted mean that the depository's bond, like the treasurer's, is a lien on the property of the principal and sureties from its date. Seay v. Bank of Rome, 66 Ga. 609; Colquitt, Governor, v. Simpson, 72 Ga. 501; Simpson & Ledbetter v. Mathis, Sheriff, 79 Ga. 159, 3 S. E. 646. These early cases also establish that the lien extends to all property, including money and choses in action when they are in a receiver's hands, and that everyone is bound to take notice of it. In the case of Colquitt, Governor, v. Simpson, a surety on a bond dated November 18, 1879, sold land on January 10, 1881, to purchasers who claimed ignorance that he was such surety. On April 1, 1881, a fi. fa. was issued by the Governor on the bond and levied on the land. The purchasers were held charged with notice and their land was held subject to the lien. The lien therefore exists before insolvency and before default of the depository, and adheres to realty aliened to others. As to choses in action it is held the lien does not prevent the exercise of the ordinary rights of set-off. State v. Brobston, receiver, 94 Ga. 95, 21 S. E. 146, 47 Am. St. Rep. 138. The statutes have been so construed to this day. Standard Accident Ins. Co. v. Luther Williams Bank & Trust Co., 45 Ga. App. 831, 166 S. E. 260. National banks are expressly made eligible to appointment by section 1253; and by an act passed in 1893, section 1256, there is a provision requiring a national bank to give bond in double the sum to be deposited although the general requirement is only that bonds shall cover fully the amount to be deposited; and a provision that all the state depositories may make bond by a deposit with the state treasurer of state or United States bonds instead of by a personal bond.

Under these statutes so construed the Governor on July 6, 1928, appointed the Hancock National Bank of Sparta, Ga., a state depository to receive state taxes, expressly referring to the act af 1879 and requiring a bond of $10,000. On July 12 the board of directors of the bank accepted the appointment and directed that the bond be made. A personal bond with surety was executed accordingly, the bond making explicit reference to the act of 1879, and being conditioned as the act requires. On the failure of the bank, May 23, 1932, it had on deposit of state's money $6,221.73, which on demand was paid to the state by the surety, Fidelity & Deposit Company of Maryland, the state assigning its claim against the bank. Relying both on this assignment and on its right of subrogation, the surety brought a bill to assert the statutory lien against the assets in the hands of the bank's receiver. On motion the bill was dismissed as respects the lien, but a claim as general creditor was decreed. The surety appeals.

It is not denied that the surety has all the rights that the state had against the bank's property. The contention is that the state can have no such lien as against a national bank, and particularly none after its insolvency, since its assets are required by 12 US CA § 194 to be paid ratably to all creditors. It will be noticed that the lien asserted is not one involuntarily imposed by the state law, but created by the contract of the managing authorities of the bank. The bank was not compelled to accept the appointment, nor, having accepted, to give a bond carrying the statutory lien, but might have made a special pledge instead. It elected to make a bond under the statute and by a reference to the statute established contractually the lien as clearly as if it had been set forth by express words. The true operation of the statute is to sanction and make lawful so far as it could such a contract. The real question is whether by federal law the contract is forbidden to a national bank.

It is first objected that such a bank, which constitutionally exists only because it is a fiscal agency of the federal government, cannot thus agree to act for the state government, nor bind itself to perform "all such duties as are required of it by the General Assembly." No duties, however, have ever been required except to receive and account for the public moneys, which is a banking function, and none are suggested which are incompatible with duty to the United States or to the banking public. It has been held that a state depository is not a state officer but only an agency to keep the public funds. Colquitt, Governor, v. Simpson, 72 Ga. 502. For fifty years national banks have served as such, and no conflict of duties has appeared.

It is next objected that the lien on all property of the bank when a bond is given is beyond the bank's powers because it disables the bank from functioning in that it cannot dispose of its lands unless the purchaser will rely on its warranty of title, and that even the money paid out and the stocks, bonds, and notes transferred from it in the course of business would be incumbered with a lien which would prevent their acceptance. This objection applies to state as well as national banks. It is forcibly stated by Judge Barrett in Re Blalock (D. C.) 31 F.(2d) 612, and it was there denied that the lien held good on money, notes, and accounts transferred by the bank in due course of trade. We think that conclusion correct. The Legislature could not have intended to tie up the commercial assets of the banks which become depositories so that they...