American Bonding Co. v. National Mechanics' Bank
| Decision Date | 01 July 1903 |
| Citation | 55 A. 395,97 Md. 598 |
| Parties | AMERICAN BONDING CO. OF BALTIMORE v. NATIONAL MECHANICS' BANK OF BALTIMORE. |
| Court | Maryland Court of Appeals |
Appeal from Circuit Court No. 2 of Baltimore City; John J. Dobler Judge.
Bill by the American Bonding Company of Baltimore against the National Mechanics' Bank of Baltimore to recover money paid on a judgment as surety. From a decree in favor of defendant, complainant appeals. Reversed.
Argued before McSHERRY, C.J., and FOWLER, BOYD, PAGE, PEARCE, and SCHMUCKER, JJ.
W Irvine Cross and Edward Duffy, for appellant.
Randolph Barton and Randolph Barton, Jr., for appellee.
On October 18, 1902, the state of Maryland recovered a judgment for $4,951.80 against the American Bonding Company of Baltimore as the surety on the official bond of James M Vansant as clerk of the court of common pleas of Baltimore City. The breach for which the suit was brought was the failure by Vansant to account for and pay over to the state certain money which had been paid to him by various banks as interest on funds received by him in his official capacity and kept on deposit with such banks. Of the money which he so received as interest on funds belonging to the state, the sum of $3,774.70 was paid to him by the present appellee, the National Mechanics' Bank of Baltimore. The American Bonding Company as surety paid the judgment to the state, and then filed the present bill to recover $3,774.70 of it from the National Mechanics' Bank. The bill alleges the appointment of Vansant as clerk on the 15th of November 1895; the filing by him of an official bond with the bonding company as sole surety, in the penalty of $50,000, and the retention of the office by him until December 1, 1897. It also avers that he on or about November 18, 1895, at the solicitation of the appellee bank, and in pursuance of his official duties, opened an account with it in the name of "James M. Vansant, Clerk," in which he from time to time deposited money belonging to the state of Maryland, collected by him in the performance of his official duties, and that in addition he, in each year, opened an account with the same bank entitled "James M. Vansant, Clerk Special," in which he deposited the license fees received by him as clerk, and that this money was afterwards transferred by him to the first-mentioned account, standing in his name as "James M. Vansant, Clerk"; that Vansant, during his occupancy of the position of clerk, also kept an individual and personal account in said bank in his own name. The bill then alleges that the bank, well knowing that the moneys deposited in the two official accounts of Vansant as clerk belonging to the state of Maryland, and had been collected by him in the performance of his official duties, allowed and paid to him individually interest at about the rate of 2 per cent. per annum on the daily balances of the said state funds, and the bill states in detail the amounts of interest so allowed, amounting in all to $3,774.70, with the respective dates of the several allowances. It is alleged that the said payment was accomplished by the bank's crediting the interest on the public funds to the individual account of Vansant, and permitting him to draw it out on his individual check, and misappropriate it, and that it was the intention of the bank in so doing to pay such interest on the public funds to him for his own personal use. It is also alleged that the interest was so allowed by the bank in pursuance of its habit of dealing with various previous clerks of the same court who had deposited with it the public funds under their charge. It is then alleged that Vansant failed to account for and pay over to the state the interest so allowed to him on the public moneys by the bank, in consequence of which the suit was brought by the state against the bonding company as his surety, and the judgment already mentioned was recovered against it, and that it satisfied and paid the same to the state; that the judgment was thereupon, according to law, entered to the use of the bonding company, and it caused execution to issue thereon, which was returned nulla bona; and that Vansant is insolvent. The bill then charges that the bank, by knowingly paying to Vansant individually interest on the public funds deposited with it by him, participated in the misapplication thus accomplished of such interest, and thereby became and was responsible to the state of Maryland for the amount of the interest, and that the bonding company, by the payment of the judgment recovered against it for the entire interest so misappropriated, was subrogated to the right of the state against the bank, and is now entitled to recover from the latter the $3,774.70 interest paid by it which forms part of the amount of the judgment.
The answer admits the deposit in the bank of the public money by Vansant to his credit as clerk as in the bill alleged, and the payment to him individually of the several sums of money in the bill charged and at the times therein set forth, and also the recovery of the judgment by the state against the appellant and the satisfaction thereof by it. It denies, however, that the money was paid in pursuance of any agreement, but asserts that it was "spontaneously and gratuitously" credited to Vansant's personal account. The answer then, by way of explanation of the transaction, asserts that for more than 30 years prior to the institution of the suit it had been the custom of the banks, including the appellee, in which the clerk of the court of common pleas deposited the public money collected by him, to allow to the clerk making such deposits "a sum of money which was equivalent to what would have been interest at the rate of about 2 per cent. per annum" thereon; that such an allowance had been made to Gray, the clerk who preceded Vansant, and that when the latter came into office the same custom had been followed by the appellee with him, and that in that way the money referred to in the bill had from time to time been placed to his individual account, and he had been allowed to check it out for his own use. The answer asserts that such custom of dealing with the said clerks by the banks was well known to, and acquiesced in by, the state and its officers, and also by the appellant at the time it became surety upon Vansant's bond, and that by reason thereof the state would have been estopped from making any claim against the appellee for the money so paid by it to Vansant, and that the appellant is for the same reason estopped from asserting the claim set up by it in the present suit.
Charles Hahn, the paying teller of the appellee, testified in the court below that, not wishing the bank to lose the clerk's account, he called to see Vansant about the time of his appointment to the clerkship, but did not find him in his office. He, however, saw several other bank men in the office for the same purpose as his own; whereupon he, in order "to clinch the matter," wrote to Vansant as follows:
John B Ramsay, the president of the bank, testified that he had no recollection of Vansant's having seen him in reference to the allowance of the 2 per cent. on the amount of public money to be kept on deposit with the bank, or of having made any agreement on the subject; but he frankly admitted that 2 per cent. on those deposits had been paid by the bank to...
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