Conecuh County v. People's Bank of Evergreen

• Decision Date: 23 May 1935
• Docket Number: 3 Div. 126
• Parties: CONECUH COUNTY v. PEOPLE'S BANK OF EVERGREEN et al.
• Court: Alabama Supreme Court

161 So. 515

230 Ala. 457

CONECUH COUNTY v. PEOPLE'S BANK OF EVERGREEN et al.

3 Div. 126

Supreme Court of Alabama

May 23, 1935

Rehearing Denied June 6, 1935

Appeal from Circuit Court, Conecuh County; F.W. Hare, Judge.

Suit in equity for preferential payment by Conecuh County against the People's Bank of Evergreen, J.H. Williams, as Superintendent of Banks, and A.E. Jackson, as liquidating agent of said People's Bank. From a decree sustaining a demurrer to the bill, complainant appeals.

Affirmed.

A.A Carmichael, Atty. Gen., and G.W.L. Smith, of Brewton, for appellant.

Hamilton & Jones, of Evergreen, for appellees.

KNIGHT Justice.

Bill by Conecuh county to have an indebtedness due said county by the People's Bank of Evergreen, an insolvent banking institution, declared a preferred claim against the assets of said bank, and to require the superintendent of banks, in charge of its affairs, to pay the amount decreed to be due said county in priority to the claims or demands of the common creditors of said bank, and to establish and have allowed, as a set-off against a demand of the bank, the claim of the county, and for judgment, with priority of payment for the balance due the county.

The bill is lengthy, but, omitting the deductions and conclusions of the pleader, the material facts averred in the bill may be briefly stated as follows: The People's Bank of Evergreen was during the year 1932, and prior thereto, a private banking corporation, organized and doing business under the banking laws of Alabama; that Conecuh county was within the class of counties which had no treasurers, but which were clothed with authority to select bank depositaries for their funds; that the board of revenue of Conecuh county on December 7, 1931, from sealed bids, ascertained that the People's Bank of Evergreen had "offered the highest rate of interest on daily balances of all funds of the county" that might be deposited with it, and thereupon by proper resolution duly passed and entered upon the minutes of the board, selected the said the People's Bank of Evergreen as the county depositary for the funds of said county, for the calendar year beginning January 15, 1932, and ending January 15, 1933. It appears that the bank agreed to pay said county 3 1/2 per cent. per annum on daily balances on all funds of the county deposited with it; that being the highest bid submitted.

It appears also from the bill and exhibits that the board of revenue, in accordance with the statutes, fixed the bond of the county depositary in the sum of $50,000. Thereafter the said bank made and filed with the board a bond in the sum of $50,000 and this bond on December 14th was duly approved by the board of revenue.

Upon its qualification as such county depositary, the funds of the county, from time to time, were duly deposited in said bank up until its failure on July 27, 1932. That from January 15, 1932, to the date of its failure, the county deposited in said bank about $30,000, and at the time the bank failed there was still to the credit of the county the sum of $7,264.95, as shown by the books of the bank.

That on July 27, 1932, the said bank became insolvent and closed its doors, and ceased to function as a banking institution, and its affairs were placed in the hands of the superintendent of banks for liquidation, and is now in the hands of said superintendent and his liquidating agent. That demand was duly made upon said superintendent for the allowance and payment of said claim as a preferred claim against the assets of said bank. That the superintendent has declined to allow the claim as a preferred demand, but recognized the claim as a common claim against the assets of the bank, to be paid ratably as such.

It further appears that the said county was justly indebted to the said bank at the time it failed in the sum of $5,970.61, and the bank was indebted to the county in the sum of $7,264.95, leaving a balance due the county of $1,294.34. No question or dispute as to the amounts of the respective claims is shown or averred.

It further appears that the deposits of the county were subject to withdrawal at any time.

The bill is filed against the superintendent of banks, A.E. Jackson, as liquidating agent, and the People's Bank of Evergreen.

The respondents demurred to the bill upon a number of grounds, all addressed to the bill as a whole and challenging its equity--one or more of the grounds of demurrer specifically take the point that the bill shows on its face that the board of revenue of Conecuh county by proper orders legally designated and appointed the People's Bank of Evergreen as the depository of its funds, and took from said bank a bond to secure said funds, and thereby waived any right it may have had to a preference in payment of the debts due it.

The contention, in part, of appellant here made, is that the county board of revenue, in selecting and appointing the People's Bank of Evergreen county depositary, was acting "under color" of certain laws, namely, sections 314, 315, 316, 317 of the Code, "and also under color" of laws amendatory thereto; yet its action was unlawful, for the reason that said laws are in conflict with a number of the provisions of the state Constitution, which the appellant has listed as follows: Sections 10, 13, 22, 68, 72, 74, 93, 94, 95, 100, 103, 212, 215, 253 and Amendment No. 12. Or, if said depositary laws are not void in toto, then they should be construed as conferring "upon the county supplementary, concurrent, and additional aids, rights, and powers, and security for handling and safe-keeping the county public revenues, but do not exclude any existing or pre-existing right of the State, county, sovereign, such as the sovereign preference, sovereign priority and lien, upon the assets of said insolvent bank in the hands of said respondents and appellees."

To none of these contentions can we give approval and assent.

As we read and construe the statutes conferring the power to appoint or designate bank depositories upon the boards of revenue and court of county commissioners of the counties falling within the list of counties to which said statutes apply, they are well within legislative competence, and impinge upon none of the provisions of the quoted section of the Constitution. The Legislature has always exercised, and rightly so, the power to provide for the handling and safe-keeping of the public revenues. If the right does not rest with the legislative branch of the government, then we fail to see just where this power is lodged.

In 18 Corpus Juris, § 46, p. 581, the author has this to say of depositary laws:

"Depositary laws have been enacted to provide for the safe-keeping and disbursement of public moneys, to enable the public to receive compensation for the use of its funds, to relieve public officers of liability as insurers, and to create more effectual remedial rights. ***

"Courts should uphold depositary laws where this can be done, and generally such laws have been upheld as constitutional and valid. A depositary law is not subject to the constitutional objection that it provides for the raising of money for, or the loaning of the state credit to, or in aid of, any corporation or association." (Italics supplied.)

It is earnestly insisted that the transaction with the People's Bank of Evergreen, whereby the county's money was placed on deposit with the bank, upon agreement that interest should be paid to the county on daily balances, established between the county and the bank the relation of debtor and creditor, and therefore constituted a loan by the county to the bank. The deposits, having been made in the bank upon lawful authority, constituted general deposits (Rushing v. Ala. National Bank, 226 Ala. 621, 148 So. 306) in contradistinction from special deposits, and therefore created the relation of debtor and creditor between the bank and the county, but it by no means follows that the deposits, though interest was to be paid on daily balances, but made subject to check at all times, constituted loans by the county to the bank.

This precise question came before this court in the case of Limestone County v. Montgomery, 226 Ala. 266, 146 So. 607, 609, 87 A.L.R. 164, wherein it was held: "But the fact that the bank pays interest on a deposit does not reflect upon its character as such. We recall here the amendment which repeals section 250 of the Constitution. Amendment No. 5, page 431, Code 1923. Applying the test of the difference between a loan and a deposit, though interest is paid, as asserted in Schumacher v. Eastern Bank & Trust Co. (C.C.A.) 52 F. (2d) 925, it is clear that the funds of the county were deposited and not loaned, when placed on general deposit, subject to check at will, with no time limit or conditions as to payment, though provision is made for interest on balance. Divide County v. Baird, 55 N.D. 45, 212 N.W. 236, 51 A.L.R. 296."

The case of Limestone County v. Montgomery, supra, was cited approvingly in the recent case of Barnes et al. v. Clarke et al., 227 Ala. 651, 151 So. 586, 90 A.L.R. 637. See, also, the case of William W. Law, a Minor, 144 Pa. 499, 22 A. 831, 14 L.R.A. 103.

Likewise it was held adversely to appellant's contention, in the case of Limestone County v. Montgomery, supra, that making county deposits in good faith by authority of law for the county's convenience and the safety of its funds was not lending the county's credit to the bank, in violation of section 253 of the Constitution.

There is no merit in the contention that the transactions with the bank were illegal lending of the public funds of Conecuh county to the bank, and therefore falling within the prohibition of section 253 of the Constitution.

We...