Bank of Commerce of Gulfport v. City of Gulfport

• Decision Date: 22 April 1918
• Docket Number: 20091
• Citation: 78 So. 519,117 Miss. 591
• Court: Mississippi Supreme Court
• Parties: BANK OF COMMERCE OF GULFPORT ET AL. v. CITY OF GULFPORT

78 So. 519

117 Miss. 591

BANK OF COMMERCE OF GULFPORT ET AL. v. CITY OF GULFPORT

No. 20091

Supreme Court of Mississippi

April 22, 1918

Division A

APPEAL from the chancery court of Harrison county, HON. W. M. DENNY JR., Chancellor.

Action by the city of Gulfport against the bank of commerce of Gulfport and another. Decree for the city and defendants appeal.

The facts are fully stated in the opinion of the court.

Decree affirmed.

D. M Graham and N. C. & C. E. Hill, for appellant.

It has been held by this court that where a depository bond has been given according to the statute no trust arises in public funds when thus deposited, but if this court as it seems to do, holds that the statute is mandatory in every respect, to be followed strictly and that it is not directory but that every requirement must be conformed to in the appointment of a depository and making it liable, then we may be permitted to submit that perhaps there are few, if any, legally qualified depositories in the state. So far as our own knowledge goes of the requirements in this regard we think we can say that very few are within that class. Besides, how is the bank examiner to know what public funds are deposited in the state bank, and when the bank claims that it is a legal depository for, said funds as to whether or not it is a legal depository, and how is he to determine whether or not the state or the bond will be liable in the event of a failure and, in fact, we might venture to suggest that a state bank examiner, however efficient, might not be well enough versed in the law with reference to what it takes to constitute a valid and legal depository to be able to judge of the matter at all. We respectfully submit that under the facts of this case the learned chancellor should have required the city of Gulfport to make all of the said bonds parties to the suit if indeed it should not have held that the city should first have exhausted its security before appealing to the courts against the bank, but at any rate we submit, that the said bonds should have been made parties to the said suit, and that they should have been required to respond to their liability on said bonds, because they would be liable whether they were illegal depository bonds or not, and after the said city had, through the courts, exhausted said bonds, then a judgment might have been given for it against the bank for the remainder, if anything, owing on its said deposits. We submit that the bondsmen, and each of them, and especially on the bond of 1916, would be liable to the city of Gulfport whether it, the bank was a legal depository or not, the liability of the bonds would be just the same as if all the requirements of the law had been complied with in making the bank a legal depository, for the said bonds guaranteed to the city the safe return of said deposits, and said bond was breached in that the bank did not return them; and to allow these bondsmen who procured said funds to be deposited in said bank to escape liability upon a technicality that all of the requirements of the statute had not been strictly complied with in making said bank a depository would, we submit, work a great hardship upon the state, and upon the guaranty funds which should be protected for the benefit of depositors throughout the state, and upon the various creditors of said bank whose claims were not guaranteed.

The bonds in this case were not given under the same circumstances as was the one in the case of the Bank of Commerce v. Clarke, 75 So. 595, decided by this court. In that case Clarke, as sheriff, deposited the funds collected daily by him, as tax collector, during the several months of collections, to his own credit in the Bank of Commerce and at the end of the month would have them placed in the bank as a deposit, and to secure the said deposit so placed in his own name in said bank during the month, he required a personal indemnity bond to be given to him by the bank, which was done. But, nobody ever regarded that bond as being a depository bond, and said bond was taken for his own individual personal security, but in the case at bar the parties all tried to comply with the law, and it would seem that both the city and the bank, and the sureties on said bond, believed that they were legal depository bonds, and that the law had been complied with, and that the bank was a legal depository, and to permit them to escape liability upon the technical construction of the depository law, and thus saddle the whole business upon the state guaranty funds, that should be built up and not brought down, for the benefit of general depositors, would, we submit, be unfair and unreasonable. So we submit, that the holdings of the learned court below that the whole of said funds so secured should be designated as a trust fund, and in refusing to require the city of Gulfport to make said bondsmen parties to said suit, so as to fix the liability upon them, and so that the banking department could be subrogated to the rights of the said city against the said bondsmen, seems to us to be erroneous, and we, therefore, respectfully ask the court to reverse the findings of the chancellor, and to hold that the said bonds are not to escape liability because of a technical failure on the part of the bank or of the city to comply strictly with the letter of the law in the steps to constitute the bank a legal depository for said city funds.

May we further submit to the court the fact, as we view it, that the guaranty provision of the law in Mississippi was designed to protect depositors in state banks; that prior to the passage of the act there were many bank failures, causing losses to thousands of innocent depositors, and that it was the purpose and intention of the legislature in adopting said act to build up a good, strong, fund in the treasury of the state, out of which depositors might be paid and secured of their deposits in state banks, but it seems that there is a disposition throughout the state on the part of those who have claims against failed banks to pack off everything they can upon the state treasury, upon the banking department, and to ignore bonds given in the process of the business of the bank; to allow sureties to escape, and not even be sued, and to call upon the state treasury and guaranty fund of the state to carry all kinds of claims of depositors and creditors, and to allow those that ought to in fact pay said claims to escape liability, and we trust, therefore, that this court will not sanction the effort on the part of the bondsmen in this case, and of the city, to allow said bondsmen to escape liability in this matter if there is one, but that it should hold that said city should be required to make said bondsmen parties to said suit, and that their liability be established and exhausted before the city comes against the state funds for repayment.

G. W. Evans and J. L. Heiss, for appellee.

The appellants, the Bank of Commerce and J. S. Love, state bank examiner, prosecute this appeal from a decree rendered by the chancery court of Harrison county in cause No. 5288 of the City of Gulfport v. Bank of Commerce and J. S. Love, State Bank Examiner, and which decree was rendered on the 6th day of July, 1917, in favor of the complainant the city of Gulfport.

The tax collector of the city of Gulfport deposited in the Bank of Commerce a large amount of money belonging to the city of Gulfport, as tax collector of said city and that on the fourteenth day of December, 1916, the Bank of Commerce had in its possession, belonging to the city of Gulfport about forty-nine thousand, three hundred, seventy-two dollars deposited by the tax collector of said city.

Appellee states that as a matter of law said amount of money is a trust fund in the hands of said Bank of Commerce and in the hands of said J. S. Love, state bank examiner and liquidator of said bank, the appellants in this cause, by virtue of section 3485 of the Code of 1906, and that the same is a preference claim and a lien on all the assets of said bank, now in the hands of the said J. S. Love, state bank examiner.

In the case of Bank of Commerce et al. v. Clark, 75 So 595, the court says: "The banking act of 1914 and amendment thereto of 1916, were never intended to repeal and destroy the purpose and protection offered by section 3485 of the Code 1906 with reference to deposits of public money and...