Fidelity & Deposit Co. of Maryland v. Wilkinson County

• Decision Date: 08 November 1915
• Docket Number: 18252
• Citation: 109 Miss. 879,69 So. 865
• Parties: FIDELITY & DEPOSIT CO. OF MARYLAND ET AL. v. WILKINSON COUNTY
• Court: Mississippi Supreme Court

69 So. 865

109 Miss. 879

FIDELITY & DEPOSIT CO. OF MARYLAND ET AL. v. WILKINSON COUNTY

No. 18252

Supreme Court of Mississippi

November 8, 1915

APPEAL from the chancery court of Wilkinson county. HON. R. W CUTRER, Chancellor.

Suit by Wilkinson county against the Fidelity & Deposit Company of Maryland and others on bonds securing moneys deposited in the Citizens' Bank as a county depository. From the decree entered, the Alabama Fidelity & Casualty Company and another appeal, and the Fidelity & Deposit Company of Maryland and the receiver of the Citizens' Bank and others cross-appeal.

Appeal by certain surety companies from a decree in favor of Wilkinson county for money of said county deposited in the Citizens' Bank, as a county depository; said surety companies being the bondsmen of said bank. The opinion states all the facts.

The assignments of error referred to in the opinion are as follows:

"(1) The court erred in not compelling appellee to marshal assets inasmuch as it has a right to proceed against two funds, one being held by it as security, and against which it alone can proceed, while cross-appellant, as representing other creditors of the Citizens' Bank of Wilkinson county, can proceed against none of his codefendants; they being security for appellee alone, and liable to it alone for the matters and things complained of in appellee's bill of complaint."

"(3) The court erred in rendering any decree whatever against cross-appellant and said Citizens' Bank of Wilkinson county, other than one fixing the actual amount due from said bank, as county depository, so as to determine the joint liability of defendant bonding companies, whereby to apportion the amounts due from them respectively as sureties and in not decreeing that appellee proceed to make the debt due it out of said bonding companies first, to the exclusion of cross-appellant and said bank."

"(5) The court erred in fixing the amount due to appellee, from the Citizens' Bank of Wilkinson county at a present sum of thirty-two thousand, two hundred and fifty-five dollars and sixty-four cents, so placed, by calculating interest on the sum of twenty-five thousand, eight hundred and twenty-seven dollars and sixty-four cents at six per cent per annum from January 18, 1913, increased by damages at the rate of one per cent, per month until the same is paid, and further increased by adding two thousand, seven hundred dollars as a reasonable attorney's fee, and in decreeing that cross-appellant and the said bank, along with defendant bonding companies held liable on bond for year 1913, pay said sum so found due to appellee."

Overruled.

J. R. Tyson and Truly & Truly, for appellants, Illinois Surety Co., American Bonding Co., and Alabama Fidelity & Casualty Co.

Watkins & Watkins, for appellees and cross-appellants, Fidelity & Deposit Co., of Maryland and Southwestern Surety Co.

George Butler, J. E. Cassedy and D. C. Bramlette, Jr., for appellee and cross-appellant, Wilkinson County.

J. M. C. Martin and L. L. Posey, for cross-appellant receiver.

W. F. Tucker, for appellee, National Surety Co.

OPINION

SMITH, C. J.

This is the second appearance of this case in this court; the first appeal being reported in 64 So. 457.

In 1912 the Citizens' Bank of Wilkinson county was appointed one of the depositories for the county of Wilkinson, and executed to the county three bonds aggregating the sum of sixteen thousand, five hundred dollars in the following amounts: Fidelity & Deposit Company of Maryland, five thousand dollars; Southwestern Surety Insurance Company, five thousand dollars; National Surety Company, six thousand, five hundred dollars. On the first Monday in January, 1913, it was again appointed county depository for the ensuing year, and thereupon executed to the county six new bonds in the following amounts, with the following sureties thereon: Alabama Fidelity & Casualty Company, ten thousand dollars; Fidelity & Deposit Company of Maryland, five thousand dollars; Southwestern Surety Insurance Company, five thousand dollars; American Bonding Company of Baltimore, five thousand dollars; Illinois Surety Company, three thousand, five hundred dollars; United States Fidelity & Guaranty Company, one thousand, five hundred dollars.

When these new bonds were executed, the bank was insolvent, because of the embezzlement by its cashier of the greater part of its funds during the year 1912, which fact, however, was unknown to any of the other bank officials, though it could have been easily ascertained by an examination of its books. At this time there was deposited in the bank to the credit of the county the sum of thirteen thousand, five hundred and thirty-six dollars and ninety cents. The sheriff and tax collector at this time had on deposit with the bank the sum of nineteen thousand, three hundred and sixty-four dollars and seventy-nine cents, taxes collected by him and belonging to the county, which amount he caused to be transferred on the books of the bank to the credit of the county treasurer in the manner provided for the payment of county money to a county depository. On the 18th of January the insolvency of the bank was discovered by the president and other officers, who immediately closed the doors of the bank, which thereafter transacted no further business; and, after an ineffective effort had been made to liquidate its affairs, it was placed in the hands of a receiver some time in February following. When the bank suspended business, it had not declined to pay any county warrant presented to it. The clerk of the board of supervisors of Wilkinson county, shortly after the bank closed its doors, notified the sureties on the bonds for both years that the county would look to them for the payment of the money due it by the bank, and some time thereafter this suit was instituted for the collection thereof. On final hearing the court below held that the sureties on the bonds for 1912 were not liable to the county for the payment of any of the money due it by the bank, but that the sureties on the bonds executed for the year of 1913 were. The amount of money due the county by the bank on the 18th of January was twenty-eight thousand, eight hundred and ninety-two dollars and fifty-nine cents, and, since the aggregate penalties of the bonds for the year of 1913 amount to only thirty thousand dollars, the maximum amount which the bank could lawfully receive was twenty-seven thousand, two hundred and seventy-two dollars and twenty-seven cents. Consequently, of the amount due by the bank to the county one thousand, six hundred and twenty dollars and thirty-two cents was wrongfully on deposit, and was held by the court below not to be covered by the bonds, but, under section 3485 of the Code, to be a first lien on all of the assets of the bank. In addition to the amount on deposit, the court awarded the county six per cent. per annum interest, and damages at the rate of one per cent. per month upon the amount due by the bank to the county on January 18th, and also an attorney's fee of two thousand, seven hundred dollars, which the sureties on the bonds for the year 1913 were directed to pay proportionately. The decree further provided that, when the county shall have been paid in full, the sureties are to be subrogated to all the rights of the county against the assets of the bank in the hands of the receiver. From this decree the Alabama Fidelity & Casualty Company and the American Bonding Company have appealed to this court; and the other parties, except the United States Fidelity & Guaranty Company and the National Surety Company, have prosecuted cross-appeals.

Direct Appeal.

The first and second assignments of error on the direct appeal are:

"(1) The court erred in allowing attorney's fees against these appellants, defendants in the court below; such action of the court being in violation of the fourteenth amendment to the federal Constitution, in that it denied to these appellants the equal protection of the law, which is forbidden by section 1 of the fourteenth amendment to the Constitution of the United States."

"(2) The court erred in awarding any penalty against these appellants in the shape of the one per cent. per month damages which is included in the final decree rendered herein; such action being contrary to, and prohibited by, the fourteenth amendment to the federal Constitution, which prohibits that any state should deprive any person within its jurisdiction of its property without due process of law."

Section 10 of the county depository law (chapter 194 of the Laws of 1912) provides that, when a county depository fails to pay over money deposited with it by a county when lawfully demanded, the board of supervisors may "employ counsel, if necessary, to more speedily enforce the payment and expenses of such collection, including the counsel fee to be charged against such depository, and, in addition thereto, said depository shall be liable for damages at the rate of one per cent. per month for any delay in paying over any county funds when lawfully demanded, and the bond of any depository shall be liable for said expenses and damages," so that liability for this penalty and counsel fee is one of the conditions upon which these appellants were permitted to become sureties for the discharge by the Citizens' Bank of Wilkinson county of its obligation as depository for the county of Wilkinson; consequently liability therefor was not arbitrarily imposed upon appellants, but was voluntarily assumed by them. Since the state can decline absolutely to permit banks to become depositories of money belonging to the public, it necessarily follows that it can permit them to do so upon such conditions as it may see fit to impose. The...