Austin v. Guaranty State Bank

• Decision Date: 29 September 1927
• Docket Number: (No. 563.)
• Parties: AUSTIN, Banking Com'r, et al., v. GUARANTY STATE BANK OF COPPERAS COVE et al.
• Court: Texas Court of Appeals

300 S.W. 129

AUSTIN, Banking Com'r, et al., v. GUARANTY STATE BANK OF COPPERAS COVE et al.

(No. 563.)

Court of Civil Appeals of Texas. Waco.

September 29, 1927.

Rehearing Denied November 3, 1927.

Appeal from District Court, Coryell County; Joe H. Eidson, Judge.

Action by the Guaranty State Bank of Copperas Cove and others against Chas. O. Austin, Commissioner of Banking of the State of Texas, and others. From interlocutory orders granting a temporary injunction, defendants appeal. Orders reversed.

John W. Brady, John W. Goodwin, Claude Pollard, and R. M. Tilley, all of Austin, and John B. Daniels, of Temple, for appellants.

McClellan & Cross, of Gatesville, for appellees.

GALLAGHER, C. J.

This is an appeal from an interlocutory order made on application of appellee Guaranty State Bank of Copperas Cove, Tex., joined by the several individuals composing its board of directors, by the judge of the district court of Coryell county in chambers, granting a temporary injunction restraining appellant Chas. O. Austin, commissioner of banking of the state of Texas, from taking over or attempting to take over the affairs of appellee bank and from levying or attempting to levy any assessment against the stockholders of said bank, or in any way interfering with the management thereof, and restraining appellant First State Bank of Copperas Cove from any further effort toward inducing the commissioner of banking to take over the affairs of appellee bank or to levy an assessment against the stockholders and from demanding anything of said bank or its officers until it has first exhausted its rights and remedies against the makers of certain notes, the payment of which notes had been guaranteed in writing by appellee bankk, and appointing a receiver to take charge of the affairs and assets of appellee Guaranty State Bank.

Both said banks were on February 27, 1926, and had been for some time prior thereto, engaged in business in Copperas Cove, Tex. On that date the First State Bank assumed the liability of the Guaranty State Bank to all its depositors and promised to pay the same in full. The consideration for such assumption was the payment of a small amount of cash and the delivery by the Guaranty State Bank to the First State Bank of notes of its customers, amounting in face value to the balance which said First State Bank had promised to pay to such depositors after deducting such cash payment. The notes so delivered were 63 in number and aggregated $13,472.42. Three of said notes were past due at that time; one by its terms was to become due on November 1, 1926, and one on December 31, 1926. All the other notes delivered were by their terms to become due at various dates from March 1 to October 10, 1926, inclusive. Said notes were delivered on the 27th day of February, 1926, and accompanied by a list thereof, to which was attached the following agreement:

"The above described notes are this date transferred and assigned by the Guaranty State Bank, Copperas Cove, Texas, to the First State Bank, Copperas Cove, Texas, in consideration of the First State Bank assuming payment of deposits of Guaranty State Bank. The Guaranty State Bank hereby guarantees the payment of all these notes on November 1, 1926, if not paid by borrowers. These notes have been discounted at the rate of 10 per cent. per annum from this date to November 1, 1926. Any of them may be paid before November 1, 1926, at the option of Guaranty State Bank, and on the amount paid before that time by the Guaranty State Bank or the maker of the note held by the First State Bank, the Guaranty State Bank shall be credited by the First State Bank with discount unearned between the date of payment and November 1, 1926, at the rate of 10 per cent. per annum. All interest paid on notes after maturity shall be paid to the Guaranty State Bank.

"Signed at Copperas Cove, Texas, this 27th day of February, 1926. Jouett Allen, President Guaranty State Bank. F. F. Swift, Cashier Guaranty State Bank. [Bank Seal.]"

Said arrangement was consummated by the officers of said banks under authority of resolutions adopted by their respective boards of directors. After making said transfer the assets remaining in the hands of the Guaranty State Bank were the house and lot in Copperas Cove in which it had theretofore conducted its business, the fixtures used therein, and notes of the face value of $12,815.92. Thereupon the Guaranty State Bank ceased business as a bank, and on May 5, 1926, its stockholders adopted a resolution to close business, pay all creditors in full, and distribute the remaining assets proportionately among its stockholders, and authorized the directors to do everything necessary to carry said resolution into effect. All the foregoing proceedings were either expressly or tacitly approved by the commissioner of banking.

Shortly after said notes so listed were delivered to the First State Bank its officers called the attention of the president of the Guaranty State Bank to the fact that none of the same had been indorsed by his bank, and he thereupon indorsed the same. Nothing was said at the time with reference to the force and effect of such action, and it does not appear that the same was ever considered or authorized by the directors of the Guaranty State Bank. Approximately $7,000 of the notes so delivered to the First State Bank remained unpaid on the 1st day of November, 1926, and practically all the same remained unpaid at the time the orders appealed from herein were made. The First State Bank promptly demanded payment of the amount of said notes uncollected, as provided by the guaranty given it as before recited. The Guaranty State Bank failed to comply with said demand. The First State Bank finally complained to the banking commissioner of such failure. He, on February 16, 1927, notified the Guaranty State Bank that such complaint had been made and that unless it could pay the claim of the First State Bank or make some satisfactory adjustment of the same, that it would be his duty under the law to take charge of said bank and its assets and to levy an assessment on the stockholders thereof in an amount equal to 100 per cent. of the par value of the stock held by each of them, respectively. After some fruitless correspondence, he, on March 29, 1927, notified the Guaranty State Bank that he considered it his duty under the law to take immediate possession of all the assets of the bank and to proceed to liquidate the same.

The appellees, on the 30th day of March, 1927, presented their original petition herein to the judge of said court, and he indorsed thereon his fiat directing the clerk of said court to file and docket the same and to notify appellants that he would hear the same on April 14, 1927. A hearing thereon was had at the time appointed and the orders appealed from entered in pursuance thereof. Other facts will be stated in connection with the issues of law hereinafter discussed.

Opinion.

The nature of the liability of the Guaranty State Bank to the First State Bank, growing out of the execution and delivery of the written transfer and guaranty hereinbefore set out and the subsequent indorsement of the notes so transferred, is material in disposing of the other issues presented herein and must be first determined. A guaranty as applied to the transactions under consideration is a collateral promise or undertaking by one person to answer for the payment of a debt in case of the default of another person who is in the first instance liable for such payment. 28 C. J. p. 886, § 1. There is a well defined distinction between the contract of an indorser and that of a guarantor of commercial paper. A contract of indorsement is primarily that of transfer, and a contract of guaranty is that of security. The liability of a guarantor is more extensive than that of an indorser; unless the note is promptly presented for payment at maturity and due notice of dishonor given to the indorser in a reasonable time, he will, except in certain specific instances, be discharged absolutely whether he has suffered any actual damage or not, whereas such failure does not as a general rule work an absolute discharge of a guarantor's liability. 28 C. J. p. 893, § 9; Burrow v. Zapp, 69 Tex. 474, 476, 6 S. W. 783; Walcott v. Carpenter, 63 Tex. Civ. App. 108, 132 S. W. 981, 983. A guaranty may be absolute or conditional. An absolute guaranty is an unconditional undertaking on the part of the guarantor that the principal debtor will pay the debt. A conditional guaranty imports the happening of some contingency other than the default of the principal debtor. 12 R. C. L. p. 1064, § 13. A guaranty of payment is generally regarded as absolute, that is, an unconditional undertaking that the principal debtor will pay, while a guaranty of collection is regarded as an undertaking that the guarantor will pay if the debt cannot by the exercise of proper diligence be collected from the principal debtor. 28 C. J. p. 896. A guaranty is usually deemed to be absolute unless its terms import some such precedent to the liability of the guarantor. 28 C. J. pp. 895, 896, § 11. The words of guaranty contained in the written transfer of the notes are as follows:

"The Guaranty Bank hereby guarantees the payment of all these notes on November 1, 1926, if not paid by the borrowers."

Appellants contend that the language so used constitutes an absolute guaranty, and appellees contend that the clause, "if not paid by the borrowers," makes said guaranty conditional. Such condition, under the authorities above cited, is inherent in every guaranty, whether expressed therein or not. It does not of itself render the guaranty under consideration conditional upon the exercise of diligence. 12 R. C. L. p. 1064, § 13; Shropshire v. Smith (Tex. Civ. App.) 37 S. W. 174. The original guaranty contained in the written transfer and assignment of the notes was absolute, and failure, if any, on the part...