Commercial Bank of Brookhaven v. Hardy

• Decision Date: 24 October 1910
• Docket Number: 14,411
• Citation: 97 Miss. 755,53 So. 395
• Court: Mississippi Supreme Court
• Parties: COMMERCIAL BANK OF BROOKHAVEN v. NORMA M. HARDY ET AL

53 So. 395

97 Miss. 755

COMMERCIAL BANK OF BROOKHAVEN v. NORMA M. HARDY ET AL

No. 14,411

Supreme Court of Mississippi

October 24, 1910

FROM the chancery court of Franklin county, HON. JAMES STOWERS HICKS, Chancellor.

The Commercial Bank of Brookhaven, appellant, was complainant in the court below; Mrs. Hardy and others, appellees, were defendants there. From a decree largely in favor of the defendants, granting complainant only a small part of the relief prayed, the complainant appealed to the supreme court. The facts of the case, as stated by ANDERSON, J., were as follows:--

The appellant, the Commercial Bank of Brookhaven, a creditor of the Bank of Meadville, an insolvent banking institution being administered by a receiver of the chancery court, claims priority of payment over the general creditors of said bank for the sum of $ 4,736.10. The court below decreed against such preference, and from that decree the Commercial Bank of Brookhaven appeals to this court. The material facts necessary to be set out are as follows:

"On the 15th day of February, 1908, the Bank of Meadville, being insolvent, on a bill filed in the chancery court, was put into the hands of a receiver. On February 6, 1908, the officers in charge of the bank, recognizing its insolvency and inability to continue business, suspended payment. On that date J. P. Jones, tax collector of Franklin county, had on deposit in the bank, in his official capacity as such tax collector, public funds belonging to the state and county amounting to $ 1,432.71, and C. W. Cain, treasurer of said county, had on deposit, in his official capacity, public funds belonging to the county, $ 3,309.39. On that date the tax collector and treasurer entered into the following contracts with the appellant, the Commercial Bank of Brookhaven:

Exhibit A.

"Brookhaven Miss. Feby. 6th, 1908.

"Whereas the Bank of Meadville has suspended payment to its depositors; and whereas, the undersigned, sheriff and tax collector of Franklin county, Miss. has on deposit in said bank to his credit as tax collector the sum of fourteen hundred and thirty-two dollars and seventy-one cents, and the further sum of forty-three dollars and fifty cents belonging to the county of Franklin; and whereas, the undersigned sheriff has in his hands as sheriff and commissioner the sum of four thousand six hundred and eighty-one dollars and thirty cents, being funds paid into court and coming into his hands by virtue of his office; and whereas, it is necessary in order that he make his settlements with the state and county treasurers, that the public moneys be immediately available, and that to meet the orders of the court the trust funds in his hands as sheriff and commissioner be also available: Now, in consideration of the advance to me as tax collector of Franklin county of said sum of $ 1,432.71, and as sheriff and commissioner of the sum of $ 4,681.30, by the Commercial Bank of Brookhaven, Miss. in cash, I hereby transfer and assign to said Commercial Bank all my right title, and interest in said deposits, said bank to be subrogated to my rights therein as said county sheriff and tax collector and commissioner. I herewith deliver my check to said bank for said amounts. J. P. Jones, Shff. & Tax Col. & Com'r.

Exhibit B.

"Meadville, Miss. Feby. 6th, 1908.

"No. . Bank of Meadville: Pay to Commercial Bank, Brookhaven, Miss. or bearer, $ 1,432.71, fourteen hundred thirty-two and 71/100 dollars. J. P. Jones, Tax Collector Franklin County."

Exhibit D.

"Brookhaven, Miss. Feb'y 6th, 1908.

"Whereas, the Bank of Meadville has suspended payment to its depositors; and whereas, the undersigned, treasurer of Franklin county, has on deposit in said bank the sum of thirty-three hundred and three dollars and thirty-nine cents belonging to the county of Franklin; and whereas, it is necessary, in order to meet the current expenses of the county, that the undersigned have said funds available: Now, in consideration of the advance to me, as county treasurer, of the said sum of $ 3,303.39 by the Commercial Bank of Brookhaven, Miss. in cash, I hereby transfer and assign to the Commercial Bank all of my right, title, and interest in said deposit, said bank to be subrogated to my rights therein as county treasurer of Franklin county. I herewith deliver my check to said bank for said amount. G. W. Cain, C. T., Franklin County."

Exhibit E.

"Meadville, Miss. Feb'y 6th, 1908.

"No. . Bank of Meadville: Pay to Commercial Bank, or bearer, $ 3,303.39, thirty-three hundred and three and 39/100 dollars. G. W. Cain, C. T."

On the execution and delivery of these contracts and checks by the tax collector and treasurer, the Commercial Bank of Brookhaven gave each a certificate of deposit for the amount due them, respectively, by the Bank of Meadville. The checks were never presented to the Bank of Meadville for payment. The claim of $ 4,681.30 is eliminated from consideration, having been withdrawn. The Brookhaven Bank had no interest to protect; and its purpose in accepting the assignments and checks, and paying the amounts due these officers, was to make customers of them, and at the same time have security against the Bank of Meadville for the amount so paid.

Reversed.

H. Cassedy and Green & Green, for appellant.

Code 1906, § 3485. In the Fogg case, 80 Miss. 750, the court interpreted this statute, and it was held that the tax collector was entitled to a preference over general creditors, without being able to trace moneys which he had deposited in the bank into any specific trust fund and which had been intermingled with the other money in a bank is a trust fund, and entitled to a preference. It was also held that even though the tax collector had advanced the money out of his own funds to settle with the state, county and levee board, that he was entitled to enforce the trust, saying page 756, "The fund is primarily preserved as a trust for the benefit of the state, county and levee board, and a payment to these several beneficiaries would subrogate the tax collector to their respective equities. A different result would defeat the wisdom of the legislature, and cannot be entertained."

Thus the court holds that a trust can be enforced by the tax collector as an individual in subrogation of the right of the state and county in the trust fund. The principle of assignment and subrogation is thus fixed in this interpretation of this statute.

In Metcalf v. Bank, 89 Miss. 649, it was held that moneys deposited in any bank by any officer having the custody of public funds is a trust fund and not liable to the claims of the general creditors of the bank, and that such trust has priority over an assignment for the benefit of creditors, and the Fogg case, 80 Miss. 750, supra, was expressly confirmed.

In the present case the officer having this trust fund in the bank, assigned to the Commercial Bank the amount which it advanced to take up the deposit constituting this trust fund and took an assignment of the trust fund from said officers. This was a conventional subrogation as contradistinguished from subrogation by operation of law.

There are two kinds of subrogation: (1) By operation of law, and (2) by convention. 27 Am. & Eng. Ency. of Law (2d ed.), 202.

Conventional subrogation--In General. "In order that one having no interest to protect, who pays the debt of another, or advances money for that purpose, may be entitled to succeed to the rights and remedies of the creditor in respect to the debt so paid, there must be a convention or agreement to that effect. This convention or agreement may be made with either debtor or creditor. But when the creditor was not a party to the agreement, subrogation will not be enforced to his prejudice, or to the prejudice of innocent third parties, having equal equities." Id. 256, 257.

In the instant case the transaction was made with the assent of the Bank of Meadville and its directors.

It was contended that the Commercial Bank could not recover as assignee because it was a "volunteer."

A volunteer under a subrogation is defined:--"One who advances money to pay the debt of another in the absence of an agreement, express or implied, for subrogation, will not be entitled to succeed to the rights of the creditor so paid unless there is some obligation, interest or right, legal or equitable, on the part of the persons in respect to the matter concerning which the advance is made." Id. 255.

Where there is an agreement, express or implied, for subrogation, the party paying the debt cannot be treated as a volunteer. The subrogation is an assignment, and where the legal right is assigned, then the assignee takes whatever right the assignor had and the payment could not be a voluntary payment.

In Crumlish v. Central Improvement Co., 45 Am. St. Rep. 872, it was held:

"A stranger who voluntarily pays the debt of another may take an assignment of it from the creditor and enforce the debt against the debtor, and, if, at the time the payment is made, the creditor agrees to assign him the debt, though no assignment in writing is made, the stranger will be regarded in equity as the equitable assignee of the debt, and the transaction is a purchase of the debt."

There is nothing inequitable in giving the public funds preference over general creditors, and if there were, the statute, Code 1906, § 3485, declares such preference, and the language of the statute interpreted in the Fogg case, supra, is conclusive of the proposition. Nor could it be inequitable to extend the privilege of the priority of payment to the person who advanced the money to the tax collector and county treasurer for the benefit of the state and county, and for the payment of the debts of the state and county,...