Gregg v. Hinkle

• Decision Date: 05 March 1924
• Docket Number: No. 2931.,2931.
• Parties: GREGG ET AL.v.HINKLE ET AL.
• Court: New Mexico Supreme Court

29 N.M. 576

224 P. 1025

GREGG ET AL.

v.HINKLE ET AL.

No. 2931.

Supreme Court of New Mexico.

March 5, 1924.Rehearing Denied April 14, 1924.

Syllabus by the Court.

Where a public deposit is secured in part by a depository bond or bonds and in part by the pledge of public securities, section 9 of chapter 76 of the Session Laws of 1923 directs a prorating of liability for the depository's default between the public securities, as a class, on the one hand, and the depository bonds, as a class and whether with personal or corporate securities or both, on the other, but leaves the depository securities jointly and severally liable to the extent of the respective undertakings for the loss remaining after prorating with the public securities.

The provisions of chapter 76 of the Session Laws of 1923, forbidding public deposits in an amount greater than 90 per cent. of the penal amount of the securities given to secure such deposit, does not create a limitation on the liability of the sureties to an amount less than the face of their undertakings, but is a police regulation directed to the depositing officers as an additional element of safety, in order that not only the principal of the deposit, but the accretions as well may be fully secured.

Appeal from District Court, Santa Fé County; Holloman, Judge.

Action by L. B. Gregg, Receiver, and another, Coreceiver, of the Exchange Bank of Carrizozo, against James F. Hinkle and others, members of the State Board of Finance, and others. From a judgment for plaintiff, defendants appeal. Reversed and remanded, with directions.

The provisions of chapter 76 of the Session Laws of 1923, forbidding public deposits in an amount greater than 90 per cent. of the penal amount of the securities given to secure such deposit, does not create a limitation on the liability of the sureties to an amount less than the face of their under-takings, but is a police regulation directed to the depositing officers as an additional element of safety, in order that not only the principal of the deposit, but the accretions as well may be fully secured.

Milton J. Helmick, Atty. Gen., and J. W. Armstrong, Asst. Atty. Gen., for appellants.

Wilson & Perry, of Santa Fé, for appellee intervener.A. H. Hudspeth, of Carrizozo, and E. R. Wright, of Santa Fé, for other appellees.

BOTTS, J.

The Exchange Bank of Carrizozo closed its doors on October 8, 1923, and thereafter the appellees were appointed receivers thereof. The bank had previously qualified as a depository of state moneys, and, at the time of closing, had on deposit state funds in the sum of $72,725.05. The deposit was secured by (1) a depository bond in the penal sum of $5,000, with the American Surety Company as surety; (2) a depository bond in the penal sum of $5,000, with the United States Fidelity & Guaranty Company as surety; (3) depository bonds aggregating a total penal sum of $23,500 with various personal sureties; and (4) a pledge of United States Liberty bonds of the par value of $56,800. The demand of the state treasurer for the payment of the state deposit having been refused, the state board of finance took steps to make good its loss out of the securities, and, to that end, advertised that said Liberty bonds would be sold at public auction on the 10th of December, 1923, with the intention of converting them into cash in conformity with the provisions of the Public Moneys Act, and applying the entire proceeds upon the state's loss. Before the advertised date of sale, the receivers, under authority of an order of the district court in which the receivership case was pending, arranged for the necessary funds and tendered to the board of finance an amount equal to 90 per cent. of the par value of said Liberty bonds, plus the amount of interest accretions and costs of advertisement, and demanded the return of the bonds. This demand was refused under claim that the state could hold the full value of said bonds to make good its loss. Thereupon the receivers filed their bill seeking to enjoin the sale on the theory (1) that said securities were not liable for the state's loss in an amount greater than 90 per cent. of their face, plus accretions and costs; and (2) that the state's loss should be prorated between the different kinds of security, which would have the effect of reducing the liability of the Liberty bonds even below 90 per cent. of their face. The American Surety Company intervened on the same theory and asked that the court ascertain the amount due the state on account of its depository bond, and that, upon the payment of the amount so found to be due, it be released from all further obligation and liability. The board of finance demurred to the bill and the intervening petition on the ground of insufficiency of facts to constitute a cause of action. This demurrer was overruled, and, the appellants declining to plead further, the receivers and intervener submitted proofs, whereupon the court found all of the material allegations of the bill and intervening petition to be true and concluded as a matter of law that, under the provisions of chapter 76 of the Session Laws of 1923, the legal and lawful deposit of public funds was limited to 90 per cent. of the penalty of depository bonds and to 90 per cent. of the par value of public securities pledged in lieu of such bonds, and that such 90 per cent. limitation fixes the extent of the liability of sureties on depository bonds and the maximum chargeable against public securities pledged in lieu of depository bonds, and that such liability was further limited by prorating the loss between the different securities. Under the 90 per cent. limitation, the court fixed the maximum liability chargeable to the pledged Liberty bonds at the sum of $51,120, plus accretions; that chargeable to depository bonds with personal sureties at the sum of $20,250, plus accretions; that of the depository bond of the United States Fidelity & Guaranty Company at $4,500, plus accretions; and that of the depository bond of the American Surety Company at $4,500, plus accretions; and, by applying the pro rata limitation of liability, found the amount due on account of and chargeable to the pledge of Liberty bonds to be $46,258.65, that due from the personal sureties on their depository bonds to be $18,324.28, that due from the United States Fidelity & Guaranty Company on its depository bond to be $4,072.06, and that due from the American Surety Company on its depository bond to be $4,072.06, plus accrued interest in all cases, and plus costs of advertisement of sale in the case of the pledged public securities, and thereupon adjudged and decreed that upon the receivers paying to the state treasurer the sum found due under the pro rata...