Howard County v. Fayette Bank
| Decision Date | 18 April 1941 |
| Docket Number | 37174 |
| Citation | 149 S.W.2d 841,347 Mo. 982 |
| Parties | Howard County v. Fayette Bank, R. Waldo Holt, Commissioner of Finance, and R. T. Copeland, Deputy Commissioner, Appellants |
| Court | Missouri Supreme Court |
Appeal from Howard Circuit Court; Hon. A. R. Hammett Judge.
Reversed and remanded (with directions).
A W. Walker and Hunter & Chamier for appellants.
(1) Respondent had the burden of proof. The burden was on it to prove all the facts necessary to sustain a claim for preference. The presumption is that the deposit created a debtor-creditor relation and that the claimant is not entitled to a preference. Security Natl. Bank Sav. & Trust Co. v. Moberly, 340 Mo. 95, 101 S.W.2d 33; Landwehr v. Moberly, 338 Mo. 1106, 93 S.W.2d 935; In re Citizens Bank v. Senath, 102 S.W.2d 830; Western Union Tel. Co. v. Fid. Bank & Trust Co., 103 S.W.2d 489; Moehlenkamp v. Savings Trust Co., 108 S.W.2d 607; In re Home Trust Co., 69 S.W.2d 212; Smalley v. Queen City Bank, 94 S.W.2d 959; Langhorst v. Rosebud Bank, 78 S.W.2d 121; McPheeters v. Scott County Bank, 63 S.W.2d 460; In re North Mo. Trust Co., 39 S.W.2d 412; Craig v. Bank of Granby, 238 S.W. 507. (2) A rigid and literal compliance with the depository law is not indispensable to the validity of the depository bond; and especially is not required if no public or private right is prejudicially affected. Immaterial variances from statutory form will not render the bond invalid. There was a substantial compliance with the depository law in this case, and that is all that was necessary under the law. The title to the public funds passed to the Fayette Bank, and the relation of debtor and creditor arose. Therefore respondent was not entitled to a preference and the judgment of the trial court is erroneous in establishing a preference in its behalf. Powell v Moberly, 334 Mo. 611, 127 S.W.2d 669; School Consolidated Dist. No. 10 v. Wilson, 135 S.W.2d 349; Town of Canton v. Lewis County Bank, 338 Mo. 817, 92 S.W.2d 595; Mitchell v. Bank of Ava, 333 Mo. 960, 65 S.W.2d 99; Boone County v. Cantley, 330 Mo. 911, 51 S.W.2d 56; Wright County v. Farmers & Merchants Bank, 30 S.W.2d 32; School Dist. of St. Joseph v. Bank, 325 Mo. 1, 26 S.W.2d 785; Henry County v. Salmon, 201 Mo. 136, 100 S.W. 80; 18 C. J. 585; 11 C. J. S. 410; 9 C. J. 24; 8 Am. Jur. 709, 719; State ex rel. v. McKay, 325 Mo. 1075, 30 S.W.2d 83. (3) Even though there was not a literal rigid compliance with the depository statute, nevertheless the Fayette Bank was at least a de facto depository. The contract was entered into in good faith between the county and the bank; 20 days' notice for receiving bids was given and due publication had thereof; the bank submitted its bid and the same was approved and the bank designated the county depository; a bond was given which satisfied the statutory requirements; the parties accepted and recognized the bank as the depository of county funds in good faith; the bank received the county funds as depository and acted as such, performing the contract to its detriment at least so far as it became obligated for the payment of interest; the county accepted whatever benefits were to be derived from the contract. Wright County v. Farmers & Merchants Bank, 30 S.W.2d 32; In re North Missouri Trust Co., 39 S.W.2d 418; School District of St. Joseph v. Security Bank, 26 S.W.2d 785; 18 C. J. 591; Henry County v. Salmon, 201 Mo. 153; Powell v. Moberly, 334 Mo. 611, 127 S.W.2d 674. (4) The bond of a de facto depository is binding when public funds have been deposited in reliance thereon, although there has been a literal compliance with the statute, especially where there is a recital in the bond that the principal has been duly designated as a depository. The county funds were deposited in the Fayette Bank in reliance on the bond in question and there was a recital in the bond that the Fayette Bank had been duly designated as a depository. 18 C. J. 591; Henry County v. Salmon, 201 Mo. 136; Wright County v. Farmers & Merchants Bank, 30 S.W.2d 34; Powell v. Moberly, 334 Mo. 611, 127 S.W.2d 669. (5) Respondent is estopped to deny the existence of the contract empowering the Fayette Bank to serve as county depository, and therefore is not entitled to a preference, because of its accepting and acquiescing in the bank or its depository and because of the course of dealing between the parties. Henry County v. Salmon, 201 Mo. 136; State ex rel. v. McKay, 30 S.W.2d 83; Cole County v. Trust Co., 302 Mo. 222, 257 S.W. 774; In re North Missouri Trust Co., 39 S.W.2d 418; Powell v. Moberly, 334 Mo. 611, 127 S.W.2d 669; 21 C. J. 1215.
Jack H. Denny, Rubey M. Hulen and J. A. Collet for respondent.
(1) Laws governing the giving of security for public funds must be strictly complied with in order to create the relationship of debtor and creditor between the depositor and the bank. Marion County v. First Sav. Bank of Palmyra, 80 S.W.2d 863; Boone County v. Cantley, 51 S.W.2d 58. (2) Under the provisions of the Session Act of 1937 (Laws 1937, p. 502), county depositories were required to give security for public funds of the kind designated by the statute. Failure of the Fayette Bank to comply with the law in the giving of security for public funds deposited, subsequent to the effective date of the 1937 act, created a trust in favor of the county as to all funds deposited in violation of the law. Ralls County v. Commissioner of Finance, 66 S.W.2d 116; 1937 Mo. Sess. Acts, pp. 502, 503; Mitchell, County Treasurer, v. Bank of Ava, 65 S.W.2d 103; In re Cameron Trust Co., 51 S.W.2d 1025; Ralls County v. Commissioner of Finance, 66 S.W.2d 117; White v. Greenlee, 49 S.W.2d 132; Huntsville Trust Co. v. Noel, 12 S.W.2d 754. (3) The Act of 1937 did not violate any contract theretofore entered into between the Fayette Bank and Howard County in relation to the deposit of public funds, because: (a) The law (R. S. 1929, sec. 12197) at all times provided that the county court might require other or additional securities for county deposits and that statute could not be abrogated by contract, and (b) The control of the State over public funds is the exercise of valid police power and its right to protect those funds cannot be restricted by contract. Marion County v. First Savs. Bank of Palmyra, 80 S.W. 861; McLaughlin v. Dillingham, 68 L.Ed. 748; White v. Greenlee, 49 S.W.2d 135; Cummings v. Spaunhorst, 5 Mo.App. 32; State ex rel. McKittrick v. Blair, 63 S.W.2d 65; McSurely v. McGrew, 140 Iowa 163; Storen v. Sexton, 200 N.E. 251, 104 A. L. R. 1359; Home B. & L. Assn. v. Blaisdell, 290 U.S. 398; Southwest Missouri Railroad Co. v. Pub. Serv. Comm., 219 S.W. 382. (4) Howard County, through its treasurer, having on deposit in the Fayette Bank subsequent to September, 1937 (effective date of the 1937 act), money in excess of the amount on deposit at the time the bank closed, the law presumes that the money was paid out in the order in which it was received and that the money on hand of Howard County, at the time the bank closed, was the last money deposited. Liquidation of Financial Institutions by Braver (1936 Ed.), p. 45; Cherry v. Oklahoma, 17 Okla. 217. (5) There must be such a substantial compliance with all the terms of the statute by the county and the bank, providing for the selection of a depository for public funds, as to show an intention to follow the law, else the relationship of debtor and creditor is not created and the public funds deposited become trust funds. In re Cameron Trust Co., 51 S.W.2d 1026; Marion County v. First Sav. Bank of Palmyra, 80 S.W.2d 864; White v. Greenlee, 85 S.W.2d 114. North Mo. Trust Co. v. Cantley, 39 S.W.2d 415; Harrison Township v. Bank, 46 S.W.2d 166; Mitchell v. Bank of Ava, 65 S.W.2d 99; School District of St. Joseph v. Bank, 26 S.W.2d 785; Henry County v. Salmon, 201 Mo. 136; State ex rel. v. McKay, 30 S.W.2d 83; Cole County v. Trust Co., 302 Mo. 222; Boone County v. Cantley, 51 S.W.2d 56; Black's Law Dictionary (3 Ed.), p. 513; Howard v. Burke, 248 Ill. 224; State ex rel. Comstock v. Hempstead, 83 Conn. 554; State ex rel. Rife v. Hawes, 177 Mo. 377.
Bradley, C. Hyde and Dalton, CC., concur.
Plaintiff's claim for $ 27,378.54 against the failed Fayette Bank was allowed as preferred and defendants appealed.
The question is: Did the relation of debtor and creditor exist between the county and the bank, as to county funds on deposit at the time the bank closed on November 2, 1938? If such relation existed, plaintiff was not entitled to a preference. As to whether such relation existed depends upon whether the bank was selected as the county depository on July 5, 1937, and if so, whether it so remained after the effective date of the act of 1937, Laws 1937, p. 502, now Sec. 8183, R. S. 1939.
Section 2485, R. S. 1939, 4 Ann. Stat., sec. 2083, p. 2659, fixes terms of the county court, of such counties as Howard, as the first Mondays in February, May, August, and November, hence the first day of the regular May term of the county court was on May 2nd. June 8, 1937, during the May term, the county court made an order for publication of notice for bids of banks which desired to be selected as county depository, or depositories, and this notice was duly published. The order and the notice recited that the county funds "will be divided into two parts, viz., general fund and school funds and bids for the depository of each fund will be made separately." The order for notice called for publication in some newspaper of Howard County "20 days before the commencement of the May adjourned term" on July 5, 1937, and the notice was so published. And the notice recited that bids would be received "until 10 o'clock A. M., on the 5th day of July, 1937, at the May adjourned term" of the court, and that the successful...
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