Bowie County v. Farmers' Guaranty State Bank

• Decision Date: 26 November 1926
• Docket Number: (No. 3276.)
• Citation: 289 S.W. 451
• Parties: BOWIE COUNTY v. FARMERS' GUARANTY STATE BANK OF NEW BOSTON.<SMALL><SUP>*</SUP></SMALL>
• Court: Texas Court of Appeals

289 S.W. 451

BOWIE COUNTY v. FARMERS' GUARANTY STATE BANK OF NEW BOSTON.^*

(No. 3276.)

Court of Civil Appeals of Texas. Texarkana.

November 26, 1926.

Rehearing Denied December 23, 1926.

Appeal from District Court, Bowie County; Hugh Carney, Judge.

Suit by Bowie County against the Farmers' Guaranty State Bank of New Boston. Judgment for defendant, and plaintiff appeals. Affirmed.

In January, 1925, the commissioners' court of Bowie county, as authorized and required by law (article 2440 et seq., Vernon's Statutes), invited bids from banking corporations, associations, and individual bankers desiring to be selected as the depository of funds of said county; and in February, 1925, the State Exchange Bank of New Boston having offered to pay a higher rate of interest on such funds than any other bidder offered to pay, said court selected it as such depository.

By the terms of the statute the commissioners' court was required to publicly open bids received and select as such depository the bidder offering to pay "the largest rate of interest per annum for said funds" (article 2442). Each bid was to be (article 2441) "accompanied by a certified check for not less than one-half of one per cent. of the county revenue of the preceding year as a guaranty of the good faith on the part of the bidder, and that, if his bid should be accepted, he will enter into the bond hereinafter provided." "When the selection of a depository had been made," it was provided (article 2442), "the checks of bidders whose bids have been rejected shall be immediately returned. The check of the bidder whose bid is accepted shall be returned when his bond is filed and approved by the commissioners' court, and not until such bond is filed and approved." If the bidder selected as depository failed to give bond as provided by the statute (article 2443), "the amount of such certified check," it was declared, "shall go to the county as liquidated damages, and the county judge shall readvertise for bids." The bid of said State Exchange Bank was not accompanied by a certified check, but it was accompanied by a check drawn on said bank by its cashier in favor of the county judge of Bowie county for $5,000, which sum was one-half of one per cent. of the county revenue for the year 1924. Said State Exchange Bank was insolvent at the time its bid was accepted by said commissioners' court as stated, and it never executed a bond as depository of the county funds as provided by law (article 2443) because the state banking commissioner notified it he would close it if it executed such a bond.

This suit by said Bowie county, appellant here, was to recover the amount of the check mentioned above. In its petition the county alleged that in March, 1925, the State Exchange Bank, being insolvent, closed its doors and was taken over by the banking commissioner for liquidating purposes. It alleged further, that the assets of said State Exchange Bank were transferred to the appellee bank in consideration, among other things, of the assumption by the latter of the liabilities of the former, among which, it alleged, was the liability of said State Exchange Bank on account of said check. The trial was to the court without a jury. The appeal is from a judgment denying appellant a recovery of anything against appellee, and in favor of the latter for costs.

Johnson & Waters, of New Boston, for appellant.

King, Mahaffey & Wheeler and E. L. Lincoln, all of Texarkana, for appellee.

WILLSON, C. J. (after stating the facts as above).

We think the conclusion of the trial court that the act of the commissioners' court in selecting the State Exchange Bank as the depository of the county funds was unauthorized, because the bid of said bank was not accompanied by a certified check as required by the statute, was correct. If it was, the judgment is not erroneous; for if the act of the commissioners' court was unauthorized it did not bind the county, and if it did not bind the county it did not bind the bank. 13 C. J. 331 et seq., and authorities there cited. In other words, if the selection of the bank as county depository by the commissioners' court was not binding on the county, the bank was never lawfully selected as the depository of the county's funds, and if it was never so selected it never became bound to give a bond as such depository, and therefore never became liable to the county on account of the check accompanying its bid.

Appellant insists, in support of its contention that the judgment is erroneous, that there is no substantial difference between a certified check and the check of a bank cashier on his own bank, and hence that the check which accompanied the bank's bid was a substantial compliance with the requirements of the statute. On that view it argues that the commissioners' court acted within its power and hence bound the county, when it selected the bank as depository. But we think there is a wide difference between the two kinds of checks. A check drawn by a bank on itself binds it alone, while a check it draws and has another bank to certify binds both it and the other bank. Article 6001 — 188, Vernon's Statutes 1922 Supp.; Times Square Automobile Co. v. Bank, 77 N. J. Law, 649, 73 A. 479, 134 Am. St. Rep. 811. Evidently the purpose of the lawmakers in requiring a bidder to accompany his bid with a certified check was to add the liability of another than the bidder as security for the payment of damages to the county for a failure of the bidder to give bond as provided in the statute. Evidently, also, the lawmakers did not intend to put it within the power of the commissioners' court to discriminate between bidders as that court might if it was discretionary with it to consider a bid not accompanied by a certified check as required by the statute.

In support of its contention appellant insists, further, that the bank was estopped from denying liability on the check. The argument is that the check was voluntarily deposited with the bank's bid and that the commissioners' court acted on the faith of it when they selected the bank as the county depository. The validity of the argument cannot, of course, be admitted, if the conclusion reached that the commissioners' court, for the reason stated, was without power to select the bank as depository, is correct.

The judgment is affirmed.

* Writ of error refused March 16, 1927.

HODGES, J.

I cannot agree to the opinion of this judgment and shall state my reasons later.

HODGES, J. (dissenting).

The check sued on in this case was drawn by the State Exchange Bank upon itself. It is in form the legal equivalent of a promissory note payable on demand. Upon its face it is a good common-law obligation, and its payment may be enforced if it was voluntarily issued for a lawful purpose and for a valid consideration. Leona, etc., Co. v. Roberts, Governor, 62 Tex. 615; Watkins v. Minter, 107 Tex. 428, 180 S. W. 227. That it was voluntarily issued and for a lawful purpose is conceded. It is also admitted that the conditions had occurred on which it was to be presented and paid. The only available defense is that the check was without a legal consideration. The check accompanied the bid of the State Exchange Bank for the loan of the county funds. It was delivered as an evidence of the good faith of the bidder and as a guaranty that the bidder would make the bond required by law in the event its bid was accepted. The bid was accepted, but for reasons not here material the bidder refused to make the bond and qualify as a county depository. If the commissioners' court had the legal authority to accept the bid of the State Exchange Bank, then it must be conceded that the check was based upon a legal consideration and is now a binding contract. On the other hand, if the commissioners' court did not have the legal authority to accept that bid, then the acceptance was void and the check is without any legal consideration. The power of the commissioners' court to accept the bid and make the designation is challenged upon the ground that the check accompanying the bid was not formally certified. In all other the proceedings up to that stage were regular, and the bid of the State Exchange Bank was the best offered. The only obstacle in the way of a legal acceptance, if there be any, was the failure of the bidder to have its check certified before presenting it with its application for the loan. The power of the commissioners' court to accept a bid accompanied by a check not certified, but regular and valid in all other respects, depends upon what construction should be placed upon the provisions of the statute which authorizes the selection of county depositories. Those provisions appear as chapter 2, title 44, of the Revised Statutes of 1911.

Article 2440 requires the commissioners' court of each county, at the February term following a general election, after giving 20 days' notice, to receive proposals from bankers and banking corporations desiring to be selected as a county depository for the two succeeding years. Article 2441 provides that sealed bids, or proposals, stating the rate of interest to be paid on daily balances, shall be delivered to the county judge, and further that —

"Said bid shall be accompanied by a certified check for not less than one-half of one per cent. of the county revenue of the preceding year as a guaranty of good faith on the part of the bidder, and that, if his bid should be accepted, he will enter into the bond hereinafter provided; and upon the failure of the banking corporation, association, or individual banker, that may be selected as such depository, to give the bond required by law, the amount of such certified check shall go to the county as liquidated damages, and the county judge shall readvertise for bids."

Article 2442 directs how and when the bids shall be opened and entered on the minutes of the court, and the selection of a depository made. It also provides that the...