Carroll County Bank v. Rhodes

• Decision Date: 15 December 1900
• Citation: 63 S.W. 68,69 Ark. 43
• Parties: CARROLL COUNTY BANK v. RHODES
• Court: Arkansas Supreme Court

63 S.W. 68

69 Ark. 43

CARROLL COUNTY BANK v. RHODES

Supreme Court of Arkansas

December 15, 1900

Appeal from Carroll Circuit Court in Chancery, Eastern District EDWARD S. MCDANIEL, Judge.

Decree affirmed.

Rose Hemingway & Rose and O. W. Watkins, for appellant.

One who claims the right of subrogation must be governed by the maxim, sic utere tuo ut alienum non laedas. Sheldon, Sub-4. 3 Pom. Eq. Jur. note 1, § 1419 (2d Ed.); 49 Minn. 386; S C. 32 Am. St. 566. A banker cannot excuse disobedience of a customer's order by setting up tat he knew or had reason to believe that the customer's order was given in promotion of an unlawful purpose. 2 Morse, Banking (3d Ed.) § 317; 56 Ark. 508; 76 N.C. 482. The check was negotiable, and the law imposed upon the bank the duty of paying it; and the bank did not participate in the misapplication of the funds. 2 Morse, Banking (3d Ed.) 431; 126 Mo. 82; 122 Mo. 332; 45 N.Y. 735. In order to establish usury the agreement to charge more than ten per cent. must exist at the time the money is loaned. 63 Ark. 225, 230; 81 N.Y. 293. No subsequent agreement will bar the right to recover the amount loaned. 55 Ark. 143; Tyler, Usury, 126 Perley, Interest, 210; 56 Ark. 334; Webb, Usury, §§ 307, 142. To constitute usury the sum must be paid by the borrower to the lender. A payment by a third person would not constitute usury. Perley, Interest, 203; 25 Hun, 490; 37 N.Y. 356. The directors of a corporation have absolute control of its affairs. Sand. & H. Dig., § 1330; 51 Ark. 554. There was no usury, and if the bank had to pay out the money it received, the court should have rendered judgment against Bobo and other parties made defendants in the cross bill. 53 Ark. 271; 63 Ark. 385; 56 N.Y. 214; 64 N.Y. 294; 55 Ark. 143; 57 Ark. 550. If the money with which Bobo & Maples paid the notes was public money, and they had no right to use the same, the bank has a right to judgment against them on the original notes. 1 Greenleaf, Ev. § 522; 3 Am. Dec. 446; 55 Ark. 143.

J. V. Walker, for appellees.

He who comes into equity must come with clean hands. 1 Pom. Eq. Jur. §§ 397-399. One who has participated in a violation of law cannot be permitted to assert any right founded upon or growing out of an illegal transaction. 2 Beach, Cont. 1618, and note 1; 17 L. C. P. 646; 1 Wallace (U. S.) 518, 17 L. C. P. 269; 18 L. C. P. 255; 5 Howard (U. S.) 353; 14 Howard, 70; 20 Curtis, 40. If parties be in pari delicto, they will be left where they have placed themselves. 2 Beach, Cont. 1779; 17 Am. Dec. 427; 44 Am. Dec. 718. He that hath committed iniquity shall not have equity. 47 Ark. 311. The proof established usury.Const. Ark. 19, § 13; Sand & H. Dig., § 5085; 55 Ark. 143.

Crump & Seawel, for appellees.

That which the bank ought by proper diligence to have known may be presumed to have been known. 18 Cent. L. J. 89; 104 U.S. 54; 84 Ind. 119. The bank having knowledge that the funds were public, the sureties who paid the indebtedness to the state are subrogated to all the rights and remedies which the state previously possessed. 104 U.S. 54; 100 N.Y. 31; 52 N.Y. 1; 123 N.Y. 272; Sand. & H. Dig., §§ 1715, 1849, 1850. The relation of debtor and creditor does not apply when the act of depositing is a misapplication of the fund. 124 N.Y. 324; 100 N.Y. 31. The state having the right to follow the funds deposited by Maples, the appellees would be subrogated to its rights and remedies. 53 Ark. 303; Bisp. Eq. 335. The bank and Maples were particepes criminis and joint tort feasors. L. R. 3 H. L. 14. The court had the right to render judgment against some and for other of the plaintiffs. Sand. & H. Dig., § 5852.

BATTLE J. HUGHES, J., absent.

OPINION

BATTLE, J.

On the 15th day of October, 1897, J. L. Rhodes and 47 others instituted a suit in equity against A. P. Maples. N. C. Charles, J. P. Fancher, D. H. Seitz, M. L. Coxsey, and the Carroll County Bank, all of whom, except the bank and Maples, had signed the bond of Maples as sureties. H. I. Seidel and W. R. Boyd, two other sureties on the bond, were not made parties, Seidel being insolvent and Boyd having died since the signing of the bond, leaving no estate.

Plaintiffs alleged in their complaint that the defendant, Maples, was duly elected sheriff of Carroll county, in this state, at the general election held in September, 1896; that he was duly commissioned as such sheriff, and afterwards qualified and entered upon the duties of such office; that he (Maples), plaintiffs, Seidel, Boyd, and the defendants, Charles, Fancher, Seitz and Coxsey, on the 15th day of October, 1896, executed a bond to the state of Arkansas in the sum of $ 52,700, conditioned that he would faithfully perform the duties of collector for the county aforesaid, and well and truly pay over all moneys collected by virtue of his said office, according to law; that he (Mtaples) afterwards collected in Carroll county, for the year 1896, taxes for the state of Arkansas amounting to $ 6,983.90, and failed and refused to pay the same to the state, as the law and the conditions of his bond required him to do; that afterwards, on the 24th of August, 1897, the auditor of the state issued a warrant of distress against him and the sureties on his bond, and placed it in the hands of a constable of Carroll county, who collected of plaintiffs many sums of money, which are set out in their complaint. They further allege that the Carroll County Bank was a corporation duly organized under the laws of Arkansas; that Maples, at various times, while he was collecting taxes in 1897 for the past year, deposited the moneys so collected by him with the bank to his individual credit; and that the bank at the time well knew that the moneys so collected were taxes due the state. They asked that an account be taken of the amounts so deposited, and that they be subrogated to the rights of the state, and severally have judgment against the bank for the amounts respectively paid by them, or in proportion thereto.

On the 25th day of February, 1898, the bank filed its answer and cross-complaint. It admitted the election of Maples and the execution of the bond set out in the plaintiffs' complaint; that Maples had failed to pay a large amount of money collected by him as taxes for the state, as required by his bond; that the warrant of distress issued; and that the constable under it collected the amount set forth in the complaint. It admitted that Maples during the year 1896 deposited large sums of money with it, amounting in the aggregate to $ 7,000, but denied that the sums so deposited arose from the collection of taxes due the state of Arkansas, or that any part of the sums so deposited were sums which had been assessed against it for taxes of 1896; but alleged that Maples was indebted to it for an amount exceeding the taxes assessed against it for that year, and that he delivered to it a tax receipt for which the bank gave him credit on his personal account. It denied that it knew, or had any knowledge, that any money deposited with it during the year 1896 was money collected for the state of Arkansas for taxes. It alleged that the money was deposited by Maples in his individual capacity, and drawn out by him in the ordinary and usual course of business upon his checks; that it was at no time advised by said collector or anyone else that the money deposited by him, or the money drawn out of the bank by him upon his checks, was money he had collected as taxes. And it made many other allegations unnecessary to mention in this opinion.

After hearing the evidence adduced by all parties, the court found that there was no equity in the complaint as to plaintiffs A S. Bobo, Len Nunnally, John A. Bridgeford and W. H. Linzy, and dismissed it as to them; and further found as follows: "That the said A. P. Maples was the duly authorized collector of Carroll county, Arkansas, and that parties mentioned in the complaint as such are the sureties on his bond as such collector; that in the year 1897 he collected the taxes for said Carroll county for the year 1896, and that he deposited the money, or a great portion thereof, in the defendant bank; that the bank knew at the...