Davis v. West Louisiana Bank

• Decision Date: 28 January 1924
• Docket Number: 26192
• Citation: 99 So. 207,155 La. 245
• Court: Louisiana Supreme Court
• Parties: DAVIS, Treasurer, et al. v. WEST LOUISIANA BANK et al

99 So. 207

155 La. 245

DAVIS, Treasurer, et al. v. WEST LOUISIANA BANK et al

No. 26192

Supreme Court of Louisiana

January 28, 1924

Appeal from Twelfth Judicial District Court, Parish of Vernon; John H. Boone, Judge.

Suit by Charles T. Davis, treasurer, and others, against the West Louisiana Bank and others. Judgment for plaintiffs, and defendants appeal.

Amended and affirmed.

Lemle Moreno & Lemle, of New Orleans, for appellant New Amsterdam Casualty Co.

L. D Woosley and C. E. Hardin, both of Leesville, for appellees.

OPINION

OVERTON, J.

The West Louisiana Bank was selected as depository for the funds of the parish of Vernon by the police jury of that parish. Section 5 of Act 205 of 1912 requires that the depository selected by the state, or by any of its political subdivisions or boards, shall furnish, as security for deposits made, bonds of the United States, or of its colonial possessions, or unmatured bonds of the state of Louisiana, or of any legally organized subdivision or board thereof, or shall furnish, in lieu of such bonds, an indemnity bond of a duly authorized surety company, conditioned upon the safe-keeping and return of the amounts deposited and the payment of the interest thereon; the amount of the bond to be arrived at in a manner indicated by the statute. The West Louisiana Bank elected to furnish an indemnity bond to secure the parish of Vernon, and accordingly furnished one, signed by the New Amsterdam Casualty Company, as surety, in the sum of $ 7,500, and another, in an equal amount, signed by another surety company. The bond signed by the New Amsterdam Casualty Company, which is the only bond involved in this litigation, contains the following stipulations, to wit:

"If the amount of the obligee's deposit at the time of the default of the 'principal' does not exceed the amount of this bond, the 'surety' shall be subrogated to all rights of the 'obligee' against the 'principal' and any other person or corporation as respects such default; and the 'principal' and the 'obligee' shall execute all papers required, and shall co-operate with the 'surety' to secure to the 'surety' such rights.

"If the amount of the 'obligee's' deposit at the time of the default of the 'principal' exceeds the amount of this bond, the 'surety' shall be entitled to share with the 'obligee' the amount of any dividend or payment received from the 'principal' in the proportion that the amount of this bond bears to the total amount of the deposit at the time of the default of the 'principal.' The 'surety' shall be subrogated in the same proportion to all the rights of the 'obligee' against any other person or corporation as respects the default on the part of the 'principal'; and the 'obligee' shall execute all papers required, and shall co-operate with the 'surety' to secure to the 'surety' such rights."

The West Louisiana Bank suspended payment and closed its doors on or about February 6, 1922, while the above bond was in force. At the time of the suspension of payment, there was on deposit in the bank the sum of $ 19,343.87, belonging to the parish of Vernon, and kept in the name of Charles T. Davis, parish treasurer, which sum constituted the general fund of the parish. Hence, when the bank failed, it had on deposit, belonging to the parish, a sum, which not only exceeded the amount of the bond signed by the New Amsterdam Casualty Company, but which exceeded the amount of both bonds given by the bank.

When the bank failed, the parish notified the surety company of the failure, and in due course that company tendered the parish a check for $ 7,500, the amount of the bond, and also an instrument, the purpose of which was to subrogate the company to the rights of the parish against the bank, agreeably to the terms of the bond, quoted above, and demanded that the parish sign the instrument tendered, and make the subrogation accordingly. The parish refused to execute the subrogation demanded, and declined to accept the check upon condition that it should make the subrogation. The surety company refused to make payment unless the parish signed the act of subrogation, and as a result this suit followed.

The purpose of the suit is to recover judgment against the bank and the casualty company in solido for the amount of the bond, with 5 per cent. per annum interest thereon from March 6, 1922, until paid, and 10 per cent. attorney's fees.

The chief question to be determined, as presented by the parties litigant in their pleadings, and as stated by their counsel in argument, is whether effect should be given to the stipulations in the bond, relative to the subrogation there provided, which permits the surety, after paying the bond, to share in certain proportions with the parish all payments made it by the bank, while there still remains a balance due the parish by the bank.

As there is an amount due the parish by the bank, in excess of both bonds given by the latter to secure the former, it is a matter of importance to the parish that no effect be given those stipulations, for if they should be held to be properly part of the bond, and as such effective and enforceable, then the casualty company will share, in the proportion fixed in those stipulations, all payments made by the bank to the parish on account of the indebtedness due which might and probably will result in destroying the chances of the...