Eastland County v. Chapman

• Decision Date: 28 October 1925
• Docket Number: (No. 531-4214.)
• Citation: 276 S.W. 654
• Parties: EASTLAND COUNTY v. CHAPMAN, Com'r of Insurance and Banking, et al.<SMALL><SUP>*</SUP></SMALL>
• Court: Texas Supreme Court

276 S.W. 654

EASTLAND COUNTY v. CHAPMAN, Com'r of Insurance and Banking, et al.^*

(No. 531-4214.)

Commission of Appeals of Texas, Section B.

October 28, 1925.

Error to Court of Civil Appeals of Eighth Supreme Judicial District.

Action by Eastland County against J. L. Chapman, Commissioner of Insurance and Banking, and others. Decree for plaintiff was reversed in part and rendered and affirmed in part by the Court of Civil Appeals (260 S. W. 889), and plaintiff brings error. Judgments of trial court and Court of Civil Appeals reversed, and judgment rendered for plaintiff, with order.

Burkett, Orr & McCarty, of Eastland, Bailey, Nickels & Bailey, of Dallas, and Cofer & Cofer, of Austin, for plaintiff in error.

W. A. Keeling, Atty. Gen., and John W. Goodwin and Walace Hawkins, Asst. Attys. Gen., and Conner & McRae, of Eastland, for defendants in error.

SPEER, J.

This proceeding involves a construction of certain articles of our bank deposit guaranty law upon a writ of error granted to the decision of the Court of Civil Appeals for the Eighth district (260 S. W. 889), reversing and rendering in part and affirming in part the judgment of the district court of Eastland county. The suit was instituted by Eastland county against the Security State Bank & Trust Company, the commissioner of insurance and banking, and J. R. Burnett, special agent of the commissioner, to establish as a general deposit certain of its county and school funds, and to have them classified as claims entitled to be paid out of the depositors' guaranty fund. The trial court held outright for the plaintiff as to the entire amount sued for, being $629,847.42; while the Court of Civil Appeals affirmed the judgment generally, but reversed and rendered in the particular wherein it was ordered to be paid out of the depositors' guaranty fund of the state. The Court of Civil Appeals found the following facts:

"(1) On February 14, 1921, the commissioners' court of Eastland county designated the Security State Bank & Trust Company as the county depository, and said bank entered into bond as required by law.

"(2) On April 14, 1921, one of the sureties on the bank's bond presented his application to be released, and the commissioners' court entered an order requiring the Security State Bank & Trust Company to make a new bond, which was tendered and accepted on April 14, 1921.

"(3) Subsequent to the approval of the new bond on April 14, 1921, several of the sureties suffered heavy financial losses. As a result, negotiations between the county judge, representing Eastland county, and the officials and directors representing the bank, the commissioners' court made its order and notified said Security State Bank & Trust Company that said bond was not sufficient, and required said bank to make a new bond.

"(4) In reply to this notice, said Security State Bank & Trust Company, through its duly authorized officers, wrote the letter offered in evidence, by which it was agreed that the county deposits should be placed upon guaranty fund until a satisfactory depository bond should be furnished.

"(5) The letters show clearly the nature of the agreement. By inadvertence the formal order was omitted from the minutes of the commissioners' court. As soon as this omission was discovered, the order was entered nunc pro tunc. There is not a bit of evidence impeaching this record (if indeed it is permissible to impeach it here collaterally). The testimony conclusively shows that the order expresses exactly the transaction. Even without the nunc pro tunc entry the letters speak for themselves, and show that the commissioners' court agreed with the bank to place the county's funds in a general deposit, unsecured and noninterest-bearing, until the legal demand of the commissioners' court for a sufficient depository bond might be complied with by the bank.

"(6) There is no proof that either the bank or the county contemplated a fraud against the guaranty fund. Mr. Hunt, the active vice president of the bank, wholly fails to disclose any such intent. The evidence absolutely acquits the county officials of any fraud or knowledge of the condition of the bank.

"(7) The public generally had no notice of the condition of the bank, which was receiving deposits daily. The county relief upon its agreement with the bank, and subsequent thereto deposited $85,557.83 in the bank, some of it the very day before the bank closed.

"(8) On August 2, 1921, said Security Bank & Trust Company closed, and its affairs went under the control of the commissioner of insurance and banking. Eastland county at the time had in said bank (as shown by the accounts, the pages of the general deposit ledger) the sum of $556,535.15; and $73,312.27 — total, $629,847.42, as sued for.

"(9) These claims were filed in due time and form with the commissioner of insurance and banking as unsecured, noninterest-bearing deposits, and the claims were refused."

To these facts should be added the following:

The notice referred to in finding (3) was by letter written by the county judge of Eastland county of date July 12, 1921, and the reply referred to in finding (4) was by the Security State Bank & Trust Company through its vice president by letter of same date, the notice and reply being as follows:

                                              "July 12, 1921
                

"Security State Bank & Trust Company, Eastland, Texas— Gentlemen: Whereas, at the regular June term, A. D. 1921, of the honorable commissioners' court of Eastland county, Texas, the Security State Bank & Trust Company was duly selected as county depository; and whereas, on June 3, A. D. 1921, at the May 30th meeting of said court, the same being in the May term of said court, the court approved the depository bond of said bank with the following sureties, C. T. Berringer, R. E. Mullin, R. A. Hodges, M. H. Smith, R. L. Hunt, Joe Burkett, and Allen Dabney; and whereas, subsequent to the approval of said bond banks at Ranger, Texas, in which Mr. J. S. Mullin, R. A. Hodges and M. H. Smith were in divers ways heavily interested, failed, the court is of the opinion that said bond is now insufficient:

"Now, therefore, the commissioners' court of Eastland county, Texas, finds that said bond is insufficient, and you are notified to tender said court a good and sufficient bond, and that the funds belonging to said county will be immediately withdrawn unless the same is placed in a noninterest-bearing account protected by the state guaranty fund.

                           "R. C. Starnes, County Judge."
                

The reply of the bank was as follows:

                            "Eastland, Texas, July 12, 1921
                

"Honorable Commissioners' Court, Eastland County, Courthouse, City — Gentlemen: We acknowledge receipt of your letter of even date wherein you state that in the opinion of the members of the court that the bond of this bank securing the payment of Eastland county funds is inadequate, and that we proceed to make another bond. This is to advise you that we will secure just such a bond as your body will deem adequate, and in the meantime we have placed the funds of this county on a noninterest-bearing basis, which deposit under the terms of the banking laws is protected by the depositors' guaranty fund of the state of Texas.

                   "Yours very truly
                            "R. L. Hunt, Vice President."
                

Upon the date these two letters were written it is undisputed that the Security State Bank & Trust Company was hopelessly insolvent. Under these facts, the questions arise, first, was Eastland county a depositor in the Security State Bank & Trust Company, within the protection of the depositors' guaranty fund as to the total of $629,847.42; and, if not, second, was Eastland county entitled as such depositor to protection for payment out of that fund as to the $85,557.83 deposited after the agreement above referred to? We are of the opinion the first question should be answered, "No," and the second one, "Yes."

Article 486, c. 5, tit. 14, Vernon's Sayles' Texas Civil Statutes, controlling the question is:

"In the event the commissioner of insurance and banking shall take possession of any bank or trust company, subject to the depositors guaranty fund plan of this chapter, as herein provided, the depositors of said bank or trust company, as specified in article 448, shall be paid in full out of the cash in said bank or trust company that can be made immediately available from such bank; and the remainder shall be paid out of the depositors guaranty fund through the said board, in the event the cash available in said institution shall be insufficient; provided, that deposits upon which interest is being paid, or contracted to be paid, directly or indirectly by said bank, its officers or stockholders, to the depositor and deposits otherwise secured, shall not be insured under this chapter, but shall only receive the pro rata amount which may be realized from the assets, resources and collections of and from such banks and trust companies, its stockholders or directors."

First, it is apparent, for one to be protected by the depositors' guaranty...