Frankford Exchange Bank v. McCune

• Decision Date: 05 June 1934
• Docket Number: No. 22854.,22854.
• Parties: FRANKFORD EXCHANGE BANK v. McCUNE et al.
• Court: Missouri Court of Appeals

72 S.W.2d 155

FRANKFORD EXCHANGE BANK v. McCUNE et al.

No. 22854.

St. Louis Court of Appeals. Missouri.

June 5, 1934.

As Modified on Denial of Rehearing June 19, 1934.

Appeal from Circuit Court, Pike County; B. H. Dyer, Special Judge.

"Not to be published in State Reports."

Action in replevin by the Frankford Exchange Bank, by D. R. Harrison, Finance Commissioner, who is succeeded by O. H. Moberly, present Finance Commissioner, against Joe McCune and others. From an adverse judgment, defendants appeal.

Affirmed.

Hostetter & Haley, of Bowling Green, for appellants.

Drake Watson, of New London, for respondent.

BENNICK, Commissioner.

This is an action in replevin which was brought in the circuit court of Pike county. The judge of the court disqualified himself from presiding in the cause, whereupon Hon. B. H. Dyer, one of the attorneys of the court, was duly chosen and elected to sit as special judge. A jury was waived, and the cause tried before the court alone, resulting in the entry of a judgment for plaintiff, from which defendants have appealed to this court by the appropriate steps. The nature of the judgment will be more specifically adverted to in the further course of the opinion.

The action is maintained at the instance of the commissioner of finance of the state of Missouri, who, as such, is in charge of the defunct Frankford Exchange Bank, which is located in Frankford, in Pike county. The defendants are the several members of the board of directors of the bank. Suffice it to say for the present that the purpose of the action is to recover possession of certain bonds of the bank which were turned over to defendants to indemnify them against loss by reason of their having become individual sureties for the bank upon its depositary bond given to Pike county to secure county funds on deposit in the bank.

The matter of the giving of a depositary bond to secure the deposit of county funds is covered by section 12187, R. S. 1929 (Mo. St. Ann. § 12187, p. 6459). Under the statute, the bond may be one signed by not less than five solvent sureties who are the owners of unencumbered real estate in this state of as great value as the amount of the bond; or the bank may give a qualified corporate surety or trust company as its surety; or in lieu of sureties who own real estate, the bank may pledge government or state bonds from among its own assets, such bonds to be deposited as the county court may direct.

Seemingly, the original practice of the Frankford Exchange Bank had been to give a bond secured by a corporate surety, but because of the expense of the annual premium which ran from $150 to $175, as well as for other reasons, the bank, about 1930, instituted the practice of using individual sureties, the seven directors signing in that capacity. For the first year no assets of the bank were turned over to the directors, but shortly following the signing of the bond in 1931 the bank's securities in question were assigned to the directors for their individual protection in pursuance of an understanding to that effect at the time the bond was signed.

The bond, which was for the sum of $10,000, and which was conditioned as required by the statute heretofore referred to, was filed with the county court on June 2, 1931, and was approved by order of the court on July 6, 1931. Thereafter, on August 11, 1931, pursuant to a resolution adopted by the board of directors at its regular August meeting, the contract between the bank and its directors was purportedly entered into, by the terms of which securities of the approximate par value of the face of the bond were turned over to the directors in order to protect them as sureties, and to hold them harmless from any loss which might accrue to them individually because of their liability on the bond.

It was provided in the contract that the directors should hold title to the securities until such time as their liability upon the bond should have ceased to exist, and then, after their liability had ceased, and after they had been indemnified as to any loss they might have sustained, any and all securities remaining in their hands should be returned to the bank and again become its property. It was further provided that the bank, whenever it deemed it advisable, but subject to the satisfaction of the directors, might substitute other securities for those originally assigned, the expressed object and purpose of such provision being to secure greater flexibility in the matter of handling the securities, and to insure and fully protect the directors against loss by reason of their liability as sureties on the bond.

On October 7, 1931, the bank closed its doors, having at the time a balance of $4,788.73 to the credit of the county's account. It appeared that by the time of the trial in March, 1933, all preferred claims against the bank had been paid in full, and a dividend of 10 per cent. paid to general creditors. It was shown further that by the time of the trial the securities pledged with the bank's directors had decreased very materially in value.

The petition, which was filed on December 3, 1932, was in the regular form for an action in replevin, alleging, among other things, that the bank was the owner of and lawfully entitled to the possession of the securities in the hands of the defendant directors; that the value of the same was the sum of $10,000; and that the same were wrongfully detained by defendants.

For their answer defendants admitted the facts of the case about as we have heretofore stated them, but set up that their act in securing the county's deposit was beneficial to the bank in that it was thereby enabled to obtain the deposit; that defendants would incur a loss by reason of the liability they had assumed; and that having received the benefits which flowed from the act of defendants in becoming sureties on the bond, the bank, and the commissioner of finance in charge thereof, were thereafter estopped from claiming or asserting ownership to the securities pledged with defendants to secure them in their undertaking.

For his reply plaintiff pleaded, in substance, that the contract purportedly entered into between the bank and...