Consolidated School Dist. No. 4 of Texas County v. Citizens' Sav. Bank of Cabool

• Citation: 21 S.W.2d 781,223 Mo.App. 940
• Parties: CONSOLIDATED SCHOOL DISTRICT NO. 4 OF TEXAS COUNTY, A CORPORATION, RESPONDENT, v. THE CITIZENS SAVINGS BANK OF CABOOL, A CORPORATION, IN CHARGE OF S. L. CANTLEY, COMMISSIONER OF FINANCE, APPELLANT. [*]
• Decision Date: 26 October 1929
• Court: Court of Appeal of Missouri (US)

21 S.W.2d 781

223 Mo.App. 940

CONSOLIDATED SCHOOL DISTRICT NO. 4 OF TEXAS COUNTY, A CORPORATION, RESPONDENT, v. THE CITIZENS SAVINGS BANK OF CABOOL, A CORPORATION, IN CHARGE OF S. L. CANTLEY, COMMISSIONER OF FINANCE, APPELLANT. ^[*]

Court of Appeals of Missouri, Springfield

October 26, 1929

Appeal from the Circuit Court of Texas County.--Hon. W. E. Barton Judge.

REVERSED AND REMANDED (with directions to modify decree).

Farrington & Curtis and Dale Moberly for appellant.

(1) The formation of a consolidated school district under either method provided by law is the formation of a new district and such formation abolishes the old districts. State ex rel. v. Scott, 270 S.W. 382; State v Foxworthy, 256 S.W. 466; State ex rel. v. Consolidated Dist., 209 S.W. 96; State ex rel. v. Smith, 271 Mo. 177; Section 11262; R. S. Mo. 1919; State ex rel. McGinnis v. District, 277 Mo. 34. (2) Execution of deed of trust conveying bank building of appellant to secure deposit and bond of Cabool Incorporated School District was unauthorized by law, was ultra vires and void. Divide Co. v. Baird, 212 Mo. 236; Bank & Trust Co. v. Citizens Guaranty Co., 156 S.W. 160; Smith v. Continental State Bank, 11 F. (2d S.) 907; Carter v. Bank, 110 So. 71, 162 La. 12, 51 A. L. R. 313. (3) Liability on bond is fixed by terms of the bond and one is answerable only according to its terms and provision. A bond cannot be enlarged beyond its written terms and conditions. 9 C. J., 39, 40, 46; 4 R. C. L. 56, 57; Insurance Co. v. McDearman, 133 Mo.App. 671; Fidelity Trust Co. v. Surety Co., 175 F. 200; 41 C. J. 466; Commission Co. v. Spencer, 236 Mo. 608; Sparks v. Bank, 3 Del. Ct. 274; Inman v. Nolan, 288 S.W. 1007; Home Savings Bank v. Trauble, 75 Mo. 199; Henry Co. v. Salmon, 201 Mo. 162; Cass Co. v. Harrisonville Bank, 157 Mo. 133; Berger Mfg. Co. v. Lloyd, 209 Mo. 681; Cochrane v. Stewart, 63 Mo. 424; Duncker v. Kaye, 83 Mo.App. 678. (4) By dissolving the old district, the conditions of the bond were limited to funds received from it before it ceased to exist. 9 C. J. 73; Olive v. Alter, 14 Mo. 185. It is the duty of a consolidated district to select its depository in the same manner as a county does. Section 11268, R. S. Mo. 1919. State banks have no power to encumber their real estate. Sec. 11737, R. S. Mo. 1919.

Hiett, Lamar & Covert for respondent.

(1) Sections 11,255, 11,258, and 11,259 gave Cabool Incorporated School District right to consolidate with school districts 53 and 130. (2) The word "property" as used in Section 11262, Revised Statutes Missouri 1919 is nomen generalissimum and covers every species of valuable right and interest, including real estate and personal property, easements, franchises and other corporeal hereditaments. Insurance Co. v. Railroad, 134 Mo.App. 48. The word "property" certainly includes the deed of trust in question. (3) The consolidated district was a legal entity, and had the right to hold all property, money on hands, books and papers of each of the other districts, which it succeeded. It was bound to fulfill the obligations of the other districts. Boswell v. Consolidated, 10 S.W.2d 665-668; Abler v. School District, 141 Mo.App. 189; Thompson v. Abbott, 61 Mo. 176; Springfield Light Co. v. Hobart, 98 Mo.App. 227; State ex rel. Smith, 173 Mo. 398; Zimmerman v. Produce Co., 156 Mo.App. 588; Hughes v. School District, 72 Mo. 63; Chicago Title & Trust Co. v. Zinser, 105 N.E. 718; People v. Backus, 22 N.W. 759; Scott Bluff Co. v. Bank, 212 N.W. 617; Wilson v. School District, 207 N.W. 810. (4) The bank had the power to execute and deliver the deed of trust in question to the Cabool Incorporated School District to secure the deposit of its funds in said bank. French v. School District, 7 S.W.2d 415; Cantley v. Little River Drainage Dist., 2 S.W.2d 607; Farmers & Traders Bank v. Harrison, 12 S.W.2d 755; Ahl v. Rhoads, 84 Pa. 319; Cameron v. Christy, 286 Pa. 405; City of Williston v. Ludowese, 53 N.D. 797, 208 N.W. 82; Richards v. Osceola Bank, 79 Iowa 707, 45 N.W. 294; Ward v. Johnson, 95 Ill. 215; McFerson v. National Surety Co., 72 Colo. 482, 212 P. 489; Page Trust Co. v. Rose, 192 N.C. 673, 135 S.E. 795; Williams v. Hall (Ariz.), 249 P. 755; Merrill v. Bank, 173 U.S. 131, 19 S.Ct. 360; Morse on Banks and Banking (5 Ed.), p. 143; 1 Patton's Digest, 641, and 2 Patton's Digest, 519a. (5) Under the law of Missouri the defense of ultra vires is not open to a corporation where the contract has been fully executed on one side unless it is a contract expressly prohibited by law. French v. School District, 7 S.W.2d 415; Cantley v. Little River Drainage Dist., 2 S.W.2d 607. (6) Sufficiency of minutes of board of directors of bank. Acres v. Ray County Savings Bank, 63 Mo.App. 316; Hill v. Bank of Seneca, 87 Mo.App. 590; Bank of Amsterdam v. Welliver, 256 S.W. 130; Ida County Savings Bank v. Johnston, 136 N.W. 225; Central Metropolitan Bank v. Chippewa County State Bank, 199 N.W. 901. (7) Commissioner of finance takes property of an insolvent bank subject to every disability to which the bank would have been subject while the assets were in its hands. State v. Page Bank, 14 S.W.2d 597; Insurance Co. v. Cantley, 6 S.W.2d 597; Fuel Co. v. Holland Banking Co., 8 S.W.2d 1030. (8) If the school district funds were deposited with the bank and the bank did not give security as required by law, section 9585, Revised Statutes 1919, then the act of the bank in accepting such deposit was unlawful and created a trust fund, and assets of the bank, on liquidation, were impressed with a trust in the school district's favor to the extent of its fund wrongfully obtained, which augmented the bank's assets as a whole. Huntsville Trust Co. v. Noel, 12 S.W.2d 751; Sec. 9587, R. S. Mo. 1919.

SMITH, J. Cox, P. J., and Bailey, J., concur.

OPINION

SMITH, J.

This action was begun by the filing of a petition or claim as a preferred claim on the 23rd day of November, 1927, with the clerk of the circuit court of Texas county, against the Citizens Savings Bank of Cabool, an insolvent bank in charge of the commissioner of finance of the State of Missouri, which petition alleged that the plaintiff is the successor of the Cabool Incorporated School District and has succeeded to all the rights, privileges, choses in action and property of every kind and description, belonging to the Cabool Incorporated School District at the time of the organization of the plaintiff under the name and style of Consolidated School District No. 4 of Texas County, Missouri.

The petition stated that the Citizens Savings Bank of Cabool is indebted to the plaintiff in the sum of $ 5788.91 on account of a deposit which the plaintiff had in said bank at the time the bank closed on March 17, 1927, and that the plaintiff is not indebted to said bank in any sum; that said deposit was kept and maintained in said bank under and by virtue of a certain contract entered into between the Cabool Incorporated School District and the Citizens Savings Bank on the 18th day of July, 1925, whereby the Citizens Savings Bank became the legal depository of the Cabool Incorporated School District for a period of two years from the 18th day of July 1925 until the 18th day of July 1927.

The petition states that for the purpose of securing said deposit and the faithful performance of said contract the Citizens Savings Bank on the 18th day of July 1925 executed a bond in the sum of $ 15,000 in favor of the Cabool Incorporated School District with the Citizens Savings Bank as principal and Steve Yates, A. E. Covert, and L. M. Edens as sureties, and further alleged that for the purpose of further securing said deposit and the faithful performance of said contract of the Citizens Savings Bank, the bank on the 18th day of July, 1925, made, executed, and delivered its deed of trust whereby it conveyed to Kirby Lamar, as trustee, for said Cabool Incorporated School District, all of lots fourteen (14) and fifteen (15) in block ten (10) in the original survey of the City of Cabool, Missouri. Said conveyance was made to the said Kirby Lamar in trust, and contained the following provisions, to-wit:

"Whereas the Citizens Savings Bank of Cabool, Missouri, the said party of the first part, has this day made, executed and delivered to the said party of the third part, a bond of indemnity by which it promises to pay to the said Cabool Incorporated School District or order for value received, fifteen thousand dollars ($ 15,000) upon the following conditions to-wit Whereas the Citizens Savings Bank of Cabool, Missouri, has been selected as the depository of the said Cabool Incorporated School District and if the said Citizens Savings Bank shall perform in all things its duty as such depository and faithfully render a true account of all funds received by it as such depository and pay the same out upon the order of said Cabool Incorporated School District through its duly constituted officers, then said bond is to be null and void, otherwise, to remain and be in full force and effect.

"This deed of trust is intended to be and remain as security to the said party of the third part so long as the said party of the first part shall continue to be the depository of the funds of the said party of the third part either under a continuation of the present contract and bond or under a new contract and bond, and in case a new contract and bond are hereafter executed by the party of the first part, this deed of trust is intended to secure the same as fully and to the same extent as it secures the bond herein described.

"Now therefore, if the said party of the first part or any one for it, shall well and truly perform and discharge the conditions expressed in said obligation and every part thereof, according to the true tenor, date...