Banking v. Doddridge County Bank

• Decision Date: 24 November 1936
• Docket Number: (No. 8224)
• Citation: 118 W.Va. 37
• Court: West Virginia Supreme Court
• Parties: Commercial Banking & Trust Company v. DoddridgeCounty Bank et al

118 W.Va. 37

Commercial Banking & Trust Company

v. DoddridgeCounty Bank et al

(No. 8224)

Supreme Court of Appeals of West Virginia.

Submitted October 14, 1936.

Decided November 24, 1936.

1.Receivers

The basic purpose of a receivership is the conservation of the property of other people.

2.Banks and Banking

Receivers of banks have only such authority as is conferred on them by statute or court decree. Funds in their hands are in custodia legis.

3.Trusts

Persons dealing with fiduciaries with reference to trust property do so at their peril. It is their duty to ascertain whether the fiduciary has the authority to do the thing contemplated.

Appeal from Circuit Court, Doddridge County.

Suit by the Commercial Banking & Trust Company against the Doddridge County Bank and others. From an adverse decree, plaintiff appeals.

Affirmed.

A. G. Mathews, S. A. Powell and Reese Blizzard, for appellant.

Louis A. Henderson, Clyde C. Ware and John S. Stump, Jr., for appellees.

Maxwell, Judge:

In this chancery cause, instituted in the circuit court of Doddridge County, Commercial Banking & Trust Company, a domestic banking institution, incorporated, of Parkersburg, is plaintiff, and the Doddridge County Bank, a domestic banking institution, incorporated, of West Union, E. A. Rinehart, receiver of said Ddddridge County Bank, C. E. Lawhead, receiver of various insolvent state banks, and George Ward, commissioner of banking of the State of West Virginia, are defendants. As such commissioner, Ward succeeded W. C. Given who succeeded L. R. Charter, Jr.

E. A. Rinehart, receiver as aforesaid, and the Doddridge County Bank filed a joint and separate demurrer to the bill of complaint. C. E. Lawhead, receiver, and W. C. Given, commissioner, likewise demurred. By decree of August 15, 1934, the circuit court overruled the demurrer of Rinehart and the Doddridge County Bank, but sustained the demurrer of Lawhead, receiver, and dismissed the bill as to him. The demurrer of the commissioner of banking was sustained in part and overruled in part. He remains a defendant to the bill in respect of certain matters not presented on this review.

On this appeal, awarded to the plaintiff, there is brought in question the action of the trial court in sustaining Lawhead's demurrer and dismissing him from the cause. The partial sustaining of the commissioner's demurrer goes to the same point.

Summarily stated, the following are allegations of the bill pertinent to this inquiry: That in the month of October, 1931, in the city of Parkersburg, L. R. Charter, Jr., then commissioner of banking of the State of West Virginia, and who for many years prior to his appointment as such banking commissioner had been president of the Doddridge County Bank, called at the office of his long-time friend, Reese Blizzard, president of Commercial Banking & Trust Company, and inquired if the Banking & Trust Company would be interested in receiving a deposit from C. E. Lawhead, receiver; that Charter, as banking commissioner, then stated to the plaintiff's said president that Lawhead, as receiver, had a larger account in the Doddridge County Bank than the commissioner thought advisable, and that he, the commissioner, would cause to be transferred from the Doddridge County Bank to the Commercial Banking & Trust Company about $40,000.00 of the account of Lawhead receiver provided the commercial Banking & Trust Company would make a deposit of equal amount in the Doddridge County Bank; that the amount which the receiver would thus deposit in the Commercial Banking & Trust Company would be kept there until the money which the plaintiff would deposit in the Doddridge County Bank had been repaid; that in conversation, the commissioner represented to the plaintiff's president that the Doddridge County Bank was then in good financial condition; that the plaintiff's directors approved the proposal, and a few days later, Lawhead, receiver as aforesaid, deposited to his credit with the plaintiff the sum of $39,082.88, and thereupon the plaintiff transmitted to the Doddridge County Bank for deposit a like sum; that said arrangement was entered into by the Commercial Banking & Trust Company solely for the accommodation of the Doddridge County Bank; that no part of the plaintiff's deposit in the Doddridge County Bank has been repaid; that Lawhead, receiver, has withdrawn from Commercial Banking & Trust Company a portion of the deposit he made therein, leaving a balance at the time of the institution of this suit of $28,021.63; that on January 31, 1933, the Doddridge County Bank executed to the Commercial Banking & Trust Company a bond in the same amount as the deposit which Commercial Banking & Trust Company had made in the Doddridge County Bank, which bond was conditioned to save Commercial Banking & Trust Company harmless on account of said deposit, and, with the bond, the Doddridge County Bank placed as collateral security certain notes payable to it by various persons.

Further, the bill alleges that on July 3, 1933, the Doddridge County Bank was closed by the commissioner of banking, W. C. Given, successor to Charter, and E. A. Rinehart was appointed receiver thereof; that a few weeks later, Commercial Banking & Trust Company demanded the return to it from the Doddridge County Bank of the said collateral security notes, which, after they had been delivered to the Commercial Banking & Trust Company in January, 1933, had been returned by it to the Doddridge County Bank for collection; that Given, commissioner of banking, refused to permit the return of said notes by the receiver of the Doddridge County Bank to the Commercial Banking & Trust Company.

The portion of the prayer with which we are immediately concerned is that Lawhead, receiver, be "enjoined and restrained from withdrawing or attempting to withdraw, by check or otherwise, any part of the moneys now held by the plaintiff to the credit of said Receiver, and from attempting to collect the said moneys or any part thereof, by legal proceedings or otherwise, until the further order of this Court (circuit court)." Other elements of the prayer are that there be full disclosure by Rinehart, receiver, of the above-mentioned notes which were posted by the Doddridge County Bank with the Commercial Banking & Trust Company as collateral security, disclosing whether any of the notes have been paid, and other matters relative thereto; that the Doddridge County Bank and Rinehart, receiver, be required to account to the plaintiff for all moneys paid and received by them and each of them as interest or discount on the collateral notes or any of them; that the last two named defendants be required to deliver to the plaintiff the said notes, or any renewals thereof that may have been executed; that if any balance remains due the Commercial Banking & Trust Company after receiving the proceeds of the notes aforesaid, it shall be decreed the right to charge such balance against the account of C. E. Lawhead, receiver.

Do the allegations of the bill present a case for equitable relief against Lawhead, receiver?

In support of the bill the plaintiff takes the position that under the broad and comprehensive powers of the commissioner of banking of the State of West Virginia, L....