City Nat. Bank v. Eastland County

• Decision Date: 02 November 1928
• Docket Number: (No. 472.)
• Citation: 12 S.W.2d 662
• Parties: CITY NAT. BANK et al. v. EASTLAND COUNTY.
• Court: Texas Court of Appeals

Page 662

12 S.W.2d 662

CITY NAT. BANK et al. v. EASTLAND COUNTY.

(No. 472.)

Court of Civil Appeals of Texas. Eastland.

November 2, 1928.

Rehearing Denied January 4, 1929.

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Appeal from District Court, Eastland County; Elzo Been, Judge.

Action by Eastland County against the City National Bank and others. Judgment for plaintiff, and defendants appeal. Reversed and rendered in part; reversed and remanded in part.

Gib Callaway, of Brownwood, Allen D. Dabney, of Eastland, Thompson, Knight, Baker & Harris and Seay, Seay, Malone & Lipscomb, all of Dallas, Turner, Seaberry & Springer, of Eastland, William Flippen and Beall, Worsham, Rollins, Burford & Ryburn, all of Dallas, John T. Suggs, of Denison, and Albert B. Hall, of Dallas, for appellants.

J. R. Stubblefield, Chas. C. Robey, and J. Frank Sparks, all of Eastland, and B. W. Patterson, of Cisco, for appellee.

HICKMAN, C. J.

In February, 1919, Eastland county designated the American National Bank of Eastland as county depository for the statutory two years' term. In June, 1920, the depository notified the commissioners' court that it did not desire to act as depository for a special fund which had been derived by the county from the sale of good road bonds; whereupon, the City National Bank of Eastland was designated as a depository of those special funds. By the contract between the City National Bank and the county 4.52 per cent. interest on daily balances was to be paid to the county. Upon being elected special depository, the City National Bank executed to the county five surety bonds, aggregating in amount $330,000. The names of these sureties and the respective amounts of the bonds signed by each were: Southern Surety Company, $30,000; National Surety Company, $100,000; Fidelity & Deposit Company of Maryland, $40,000, and $100,000, respectively, on the two bonds executed by it, and U. S. Fidelity & Guaranty Company, $60,000. These sureties will be hereinafter referred to as corporate sureties, and the bonds executed by them will be collectively referred to as bond No. 1.

In November, 1920, the assets of the City National Bank were taken over by the Security State Bank & Trust Company, and all of its liabilities were assumed by the latter. At that time Eastland county had on deposit with the City National Bank, according to its books, $262,436.55. This amount of credit was brought forward in the books of the Security State Bank & Trust Company after it took over the assets of the other bank. No official recognition of this change of special depositories was made by the county, but the county authorities proceeded to deal with the Security Bank, just as they had with the City Bank, depositing therein proceeds from the sale of road bonds, receiving monthly statements of the condition of the county's account, and accepting credit each month for the amount of interest due on daily balances, in accordance with the terms of the contract between the county and the City Bank. This arrangement continued, with the American National Bank remaining as the general county depository, until February, 1921, when, under the terms of the statute, a new depository for the ensuing two years was designated. Bids were advertised for, and in due course the Security State Bank & Trust Company was designated as county depository, on a contract to pay 5.65 per cent. interest on daily balances. As such depository it delivered to the county its statutory bond in the sum of $750,000, with the following sureties: S. D. Young, Edwin Hobby, D. E. Waggoner, Geo. W. Riddle, W. H. Gaston, Clarence Linz, Joe Burkett, and Allen D. Dabney. This bond was approved by the commissioners' court on April 13, 1921. It will be hereinafter referred to as bond No. 2.

On April 14, 1921, S. D. Young applied to the county to be relieved as a bondsman, and the Security Bank filed with the county a bond in the same amount as bond No. 2, and in the exact language thereof, with the following sureties: C. T. Barringer, J. S. Mullen, R. A. Hodges, M. H. Smith, Edwin Hobby, R. L. Hunt, Joe Burkett, and Allen D. Dabney. This bond will hereinafter be referred to as bond No. 3. It was approved by an order dated May 30, 1921.

On July 12th of the same year the commissioners' court caused a letter to be written by the county judge to the depository bank, notifying it that its bond was insufficient, and calling upon it to tender to the county a good and sufficient bond, and also notifying it that the funds belonging to the county would be immediately withdrawn, unless the same were placed in a noninterest-bearing account, protected by the state guaranty fund. On the same day the bank, through its vice president, R. L. Hunt, replied to this communication, advising the county that it would secure a bond which would be deemed adequate, and that, in the meantime, the funds of the county had been placed on a noninterest-bearing basis, so as to be protected by the depositors' guaranty fund.

On August 2, 1921, the Security Bank closed its doors, and its affairs were taken over by the commissioner of insurance and banking for liquidation, the bank being then insolvent. On that date there was on deposit with said bank to the credit of the county $556,535.15. That sum included various county funds, but did not include any school funds. Thereafter, the county presented to the banking commissioner two claims, one as a noninterest-bearing, unsecured depositor, and the other as a secured depositor.

In December, 1921, Eastland county instituted a suit against its depository, the commissioner of insurance and banking, and J. R. Burnett, special agent of the commissioner, to establish as a noninterest-bearing, unsecured deposit, the funds on deposit in said bank, and to have same classified as claims entitled to be paid out of the depositor's guaranty fund. In the trial court the county was successful in procuring a decree establishing its claim as unsecured, noninterest-bearing and, as such, protected by the guaranty fund, and directing its payment out of said fund. Upon appeal from that judgment, the Court of Civil Appeals held that no part of the county's claim was properly chargeable to the guaranty fund. See Chapman v. Eastland County (Tex. Civ. App.) 260 S. W. 889. A writ of error was granted in that cause by the Supreme Court upon the application of Eastland county, and, upon hearing in that court, judgment was rendered that the sum of $85,552.83, deposited by the county after the attempted transfer of July 12th, was a general deposit protected by the guaranty fund, and such fund was made liable therefor. The county collected its judgment against the guaranty fund, and has since collected a portion of its judgment against the depository bank out of the general assets of the bank.

The instant suit was instituted by the county against the City National Bank, the Security State Bank & Trust Company, Chas. O. Austin, commissioner of banking of the state of Texas, and the several sureties on bonds Nos. 1, 2, and 3 named above. The purpose of the suit was to collect from the sureties and the City National Bank the amount remaining uncollected on its judgment against the Security Bank obtained in the former suit.

The case was tried before the court without the aid of a jury, resulting in a decree that the Security State Bank & Trust Company was indebted to the county in the sum of $355,587.88, with interest thereon from August 3, 1921, at the rate of 5.65 per cent. per annum. Judgment was rendered against the sureties on bond No. 3 jointly and severally for this amount. Judgment was rendered against the sureties on bond No. 2 jointly and severally for $175,336.63, with interest from date of judgment at the rate of 6 per cent. per annum. Judgment was rendered against the City National Bank for the sum of $187,141.01, with interest from August 3, 1921, at the rate of 4.52 per cent. per annum. Judgment against the respective corporate sureties on bond No. 1 was for the following amounts: U. S. Fidelity & Guaranty Company, $60,000; National Surety Company, $100,000; Southern Surety Company, $30,000; Fidelity & Deposit Company of Maryland, $140,000. Each of these judgments against the corporate sureties was decreed to bear interest at the rate of 4.52 per cent. except the judgment against the National Surety Company, interest on which was 6 per cent. per annum.

Before discussing the several defenses urged we call attention to the fact that the total judgment rendered against the sureties on bond No. 1 exceeded by more than $100,000 the amount of the judgment rendered against their principal, the City National Bank. Obviously that was erroneous. It will also be noted that subrogation was granted to the sureties in the inverse order of their bonds; that is to say, the sureties on bond No. 3 were granted subrogation against the sureties on bond No. 2, and those on bond No. 2 were likewise granted subrogation against those on bond No. 1. That was erroneous. There was also error in decreeing that judgment against one of the corporate sureties should bear a different interest rate to that borne by the judgments against the others. We call attention to these errors for the guidance of the court upon the next trial of this cause.

Considering first the liability of the corporate sureties who executed bond No. 1 for the City National Bank as a depository for the special road funds, it is disclosed by the conclusions of law and the judgment that the theory upon which judgment was rendered against them was that, when the Security Bank took over the assets of the City Bank on November 24, 1920, there was on hand in cash and on deposit in other banks, to the credit of the City Bank, a sum of money less than the balance owing by the bank to the county on that date. It was, therefore, the opinion of the trial court that the county was entitled to judgment against the City Bank for an...